Economic Capital Management In Risk Management In China Construction Bank

Economic capital is based on the economic assessment of the internal configuration and allocated to withstand risks impact, it is deferent to equity capital and regulatory capital. The banking business is the development of the true risk level of commitment reflected in the economic capital. As economic capital is close to or more than the number of actual capital banks, the banks faced by the close to or exceeding their risk tolerance. At this time, banks will need to add actual capital or adjust their business structure, reducing the total economic capital. The economic capital allocation set by the total borders of the business risk. Holding onto the border ensure the safety of the banking business. This is the capital-to-risk management border control. From Basel Accord and the international advanced banking practice, the economic capital management has become an effective tool for banks risk management, an effective method to solve domestic banks blind expansion of scale.The economic capital management should be base for client probability of default and loss rate of default based on the measurement, really reflect the unintended losses. The economic capital should not be construed as a tool for financial management and the total economic capital and economic capital allocation should not be determined under the profit goal. Risk management in bank operation and development of the overall is playing security role by using and managing capital constraints function. Especially in the scale of commercial banks, development, speed and quality issues, the economic capital should become the most crucial link. In this sense, we can say "capital is the central in bank risk management."...