Research On The IRB System Of Domestic Commercial Banks

On the background of finance globalization and fierce international competition, how to effectively manage capitals and credit risks has become the common focus for global banking industry. So that, the International Convergence of Capital Measurement and Capital Standards:A Revised Framework (also known as New Basel Capital Accord) was issued in 2004 and come into force since 2006. In the year of 2010, China banking industry started to implement New Basel Capital Accord after preparation in 2008 and polices testing in 2009.The New Accord pointed out that the Internal Ratings-Based (IRB) approach would become the main method of quantifying credit risks for the commercial banks in the future. China Banking Regulatory Commission required domestic big commercial banks to set up effective IRB approach in line with the New Accord. Therefore, this paper conducts a research on the IRB approach in domestic commercial banks. Firstly, the paper reviews foreign and domestic researches on internal rating system, including its key credit risk factors. Secondly, the paper introduces concepts on internal rating and IRB, and analyzes its positive significance for bank credit risk management enhancement. Therefore, the paper summarizes practice experiences of global top banks and financial agencies, and analyzes domestic commercial banks'situation and challenges on the road of IRB implementation. Then, the paper researches its principles, characteristics, steps and IT system of China Development Bank's Integrated Risks Management IRB System design, also introduces its next implementing steps. Finally, the paper gives some advices on guaranteeing implementation of CDB's Integrated Risks Management IRB System in the future.The contribution of the paper is that it analyzes IRB practices in commercial banks with a view of globe, including domestic banks. Besides, the paper makes a specific research on CDB's Integrated Risks Management IRB System and put up related advices on CDB's IRB improvement. Due to the lack of data, limited time and the limited knowledge of the author, some related IRB models are not researched and the study of IRB practices in domestic banks is not adequate, which needs a further study in the future.