Research On The Construction Of Internal Ratings Of Public Enterprises In

As the continuous advance of the Basel Capital Accord and relevant regulatory guidelines from China Banking Regulatory Commission, a growing number of banks began to adopt internal ratings-based (IRB) approach for their credit risk management. Comparing to the state-owned large banks, city commercial banks, as a special group established for the same purpose of supporting their local economy, have relatively limited customer variety and weak risk resisting ability. Most city commercial banks’previously adopted measures of subjective and empirical selection of clients have brought pitfalls to their credit risk prevention. Furthermore, affected by the recent macroeconomic downturn, many small and medium sized enterprises have suffered from deteriorating business, aggravated operating obstacles and higher risk of credit default. Those changes have not only led to the increase of bad debts and non-performing loan ratio for those banks, but also brought about tremendous pressure to their credit risk management.Therefore, in order to scientifically and accurately quantify city commercial banks’ credit business, it is necessary to intensify the research on the framework of the new Basel Capital Accord and IRB, introduce the modem financial theories and statistical techniques, and develop their own models. This essay has based its research upon the example of HT city commercial bank. Through analyses of issues discovered when implementing internal ratings for corporate clients, this essay has provided advices and solutions for HT city commercial bank, which could support its decision-making and pricing for credit, and hasten its transition from traditional empirical management philosophy toward a modem standardized and professional one.