China's Banking Theory And Empirical Analysis Of The Internal Credit Rating

The Basel Committee on Banking Supervision had finalized a manuscript on the New Basel Capital Accord (also known as Basel II) in June 2003. One of the most innovative aspects of the New Accord is the Internal ratings-based (IRB) approach to credit risk, which includes two variants: a foundation version and an advanced version. Banks from all over the world had realized the importance of IRB approach in risk assessment. These banks tried their best to develop their IRB approach, attempting many ways transition from foundation to Advanced. As a chief accord of capital allocation of banks worldwide, the New Basel Capital Accord certainly would have effect on risk management in our country. We will remain implement the Basel Capital Accord of 1988, but we must accumulate theory, technology, data and talent during the period. Therefore, this is realistic and necessary to study IRB theory.Developing IRB approach is not only the need for China to catch up the world in the aspect of capital adequacy ratio, but also the need of risk management in China. Enhancing bank internal risk management helps bank to select high quality client for credit risk management and improve international competition. At present, the main difficulties are that rating management cannot come into a system and cannot have a balanced development, which is hard for internal risk rating to further credit risk management. Comparing to foreign banks, they have perfect internal risk rating system that we can use for reference.This thesis intents to outline internal risk-rating framework for our banks. It utilizes advanced experience of foreign banks, and brings forward suggestions on how to develop and use our risk rating both in theory and in practice by use of commercial banks in ShanDong province.Specifically, this thesis has six sections. Section one is introduction, which show the necessity of credit rating and innovations of the article. Section two is literature reviewing about internal risk rating models, rating application and internal rating in home country. The third section outlines the internal risk-rating framework, and...