Research And System Design, Based On The Irb Approach Of Basel Agreement Banks' Risk Exposure

From the bankruptcy of Barings Bank and Daiwa Bank, andfinancial crisis in Southeast Asia, we can see that, the problem, whichbanking are faced with is credit risk, market risk and operational risk. SoBIS(Bank for International Settlement) are paying more attention to theconcept of Enterprise-wide Risk Management and the risk managementwith quantifying and modeling technology. In Jan.2001, BIS publicizedthe "New Basel Agreement (proposal paper)". May. 2003,the ThirdQuantitative Impact Study was completed. And it is intending to replacethe Basel Agreement, which was published in 1988. The New BaselAgreement reflects the advanced risk management and supervisingtechnology, which stands for the direction of capital supervision. With thecoming and global implementing of New Basel Agreement, it has nodoubt that it will affect greatly our banking risk management, especiallyfor our state owned commercial banks. So researching and developingadvanced technology of risk management is imperative under thesituation, which can help banking to improve the efficiency of keepingrisk away, avoiding and removing risk. There are many models whichhave been used widely in the international banks, such as KMVmodel,CreditMetrics model. They represent the advanced technology ofcredit risk management nowadays. With the reforming and innovating ofour state owned commercial banks, banking are preparing to come intothe market. At the same time, they are stepping on the juice to joint withthe international banking. But meanwhile, they are faced with tremendouschallenges. That is, to keep up with the level of international riskmanagement, our banking needs a bran-new change not only onmanagement technology, but also on the way of management. But, forcommercial banks, on the one hand, they need to ensure sufficient capital;On the other hand, they do their best to minimize cost, maximize profitsand make the capital collocated sufficiently. Moreover, most of ourcommercial banks have not built a set of practicable risk managementsystem, which is based on the international credit models and has theinternational level. Traditional and single-form management approachhas not fit with the need of internationalization of our commercial banks.Thus, we need to study to use the international advanced risk models,rating models and management systems for reference. And then linkingwith the situation of our banks, using our banks' inside or outsidedatabase, we should try to build our own credit models on the new BaselAgreement, and build a set of risk management system. So we canimprove the level of our risk management. But, these are one of the mosturgent problems we must solve in the process of bankinginternationalization. Main content of the thesis. This thesis is composed of four chapters. Chapter One is the background of the whole thesis. It mainlyintroduces the risks commercial banks are confronted with, and thenspread to discuss on Enterprise-wide Risk Management step by step.First, the chapter presents the risks and risk-sorts that commercial banksare faced with, and then analyses commercial banks are facing credit risk,market risk and operational risk. Consequently, it raises the point ofEnterprise-wide Risk Management, which means, managing all operationunits of every administrative level in the banks, by using scientific way,metric approach and modeling. The thesis then shows the actuality offoreign Enterprise-wide Risk Management, the technology and methodthey are using. Comparing with these, the paper keeps on discussing therisk management level of and the present status of Enterprise-wide RiskManagement of our banking deeply. By the way of comparing ofdomestic and foreign actuality, the paper tries to look for a practical wayfor Enterprise-wide Risk Management. Chapter two is a necessary preparation for the study of the last twochapters, which introduces, summarizes and analyses the BaselAgreement. Firstly, the thesis reviews the coming and history of BaselAgreement. And then derives the new Basel Agreement's coming on, thegrate chan...