Agricultural Bank Of China, Inner Mongolia Branch Of The Implementation Of Economic Capital Management

Financial industry is closely with risk measurement that is the main concern in the modern financial sector .In the practice of risk management, the economic capital system has been used more and more widely. Under such system, financial institutions may quantify the risk they are facing and calculate the capital against those risks. Economic capital is a kind of capital that is used by the bank to resist the business risk and it's equal to the sum of unexpected loss. As dummy capital, economic capital is very important in risk-averse. And to strengthen economic capital management has more significance for banks to dispatch their capital flexibility, implement their strategy establish their performance measurement system and find out the optimum price of loan."Regulation on Capital Adequacy of Commercial Banks in China" was published and implemented in March 2004 which has brought a deep influence to Chinese bank industry. Restricting effect of capital has emerged on scale expansion of commercial banks. As the core of management of modern commercial banks, capital management becomes more and more important.For recent years, many commercial banks in China start to introduce the concept of economic capital management and actively establish the economic capital management system suitable to the State's situation and the bank's practice. The paper gives a brief introduction on the concept, connotation, effect, and basic principle of economic capital and other theory such as RAROC and EVA theory relevant to the economic capital, and it also carries out a research on the necessity, method and management system of economic capital management of Agricultural Bank of China, Inner Mongolia Branch. The paper analyses the business operation of Agricultural Bank of China, Inner Mongolia Branch by using economic capital management theory and proposes the options of increasing model of Agricultural Bank of China, Inner Mongolia Branch under the restriction of economic capital.