China's Commercial Banks' Internal Rating

Internal rating of the commercial banks, mean that the department and persons of credit evaluating depend on date foundations and use methods to analyze debtor's ability and will of fulfilling the contract on time, and the risk level of financial transaction of contract, then regard this as the reference basis of credit decision. Internal Ratings-Based Approaches (IRB) is the core of Basel II. The internal rating of the bank is the basis of the IRB. Only by having an internal rating systems and technical means, the banks have the ability to use the IRB approach to capital regulation. Internal rating is very important to commercial bank's modern credit risk management. It is the foundation of the bank.The paper first review the internal rating theory on a new angle. Based on the core content of the Basel II—IRB, the paper research the theory of the internal rating and on the relations between the internal rating and IRB, Studying the basic elements of the internal rating. At the same time, with the internal rating more comprehensive understanding the paper compare the difference between the internal and external rating, and research the history of the internal rating.And then the paper research international bank's internal rating, summed up the characteristics of their internal rating. From the international bank's internal risk rating system and the practice of internal rating model. Both internal rating system framework, the use of the IRB approach, the rating grade rating, as well as the results of the application can be embodied the advanced risk management philosophy and risk management skills. China's commercial banks need to study it.Then, research the process of China's commercial banks' internal rating, the paper analysis the current development of the internal rating. Internal risk of Bank of Communications for example, the paper find the internal risk of China's commercial banks flaws and shortcomings, the China's banking industry need to improve their internal rating system. Compare with the Basel II, there are still a lot of the lack places in the internal credit rating management of China's bank, especially the quantitative risk management still backward. Therefore, the Basel II agreement on the core content-IRB, by studying from the large international banks, speeding up the construction of the system, strengthening the application of the results rating, we can improve internal rating. The construction of China's commercial banks internal rating system is very important.