Research On Credit Risk Measurement Of China Commercial Banks Based On The IRB Approach

Risk is the basic elements of affecting financial decision-making behavior. In real life, the risk is everywhere. Bank is the receiver of highly liquid financial risk, so constructing scientific risk management system is especially important for its. The risks which commercial banks face are mainly credit risk, operation risk, market risk, and so on. The studies of World Bank to the national banking crisis show that credit risk is the main reason of banks'bankruptcy. Therefore, with further opening and development of China financial markets, the risk management, especially the credit risk management, is the greatest challenge of China commercial banks during themselves development and perfecting process.As early as 1987, the Basel Committee on Banking Supervision which is subordinate to Bank for International Settlement put forward the sacred convention of international Banking:Basel Accords, which aimed to encourage bank risk management and reduce the possibility and cost of bank bankruptcy. And during the after 20 years, the Basel Committee on Banking Supervision unceasing revision Basel Accords, and successively announced the new Basel Accords and Basel Accords III, which expected to improve the risk, especially credit risk, management systems of all the banks and supervisors.The IRB was officially proposed in this context, and was asked to promote the use between the banks in all countries. The IRB is a kind of method that satisfies certain minimum conditions and disclosure requirements after approval by the bank regulators. And according to the commercial bank to risk factors determine our estimated the lowest risk exposure to specific capital requirements, so as to ensure that the bank capital adequacy. The IRB is an important method to measure credit risk, which improves the core competitiveness of the Bank by the way of encouraging Banks of autonomous research and management methods, measuring and to enhance the bank's internal control mechanism and risk management mechanism. Compared with the developed countries, China commercial bank credit risk management of commercial Banks is relatively backward, but this does not mean China do not take seriously. Instead, China's banking regulatory commission respectively issued the paper which named'Implementation Guidance with New Basel Accord China Banking Carrying Out'in 2007 and'Supervisory Guidelines of the Commercial Bank Credit Risk of Internal Rating System'in 2008. The two papers explicitly show that commercial Banks must gradually implement Basel agreement and internal ratings-based approach to improve the management level of credit risk requirements. Therefore, the practicability and urgency of IRB and credit risk management has needless to theory. Relatively, These problems to China commercial Banks, how to pushing the IRB and which model to measure credit risk, discussed and solved become more important.The text is based on a comprehensive study of the related literature at home and abroad, begins with the definition of from credit risk and characteristics, and research credit risk management methods and models. First, it systematically introduces the credit risk and its theoretical basis, the content of Basel Accord, the related requirements of IRB, etc. Then discuss and compare the credit risk metric aspects of various methods and models, including the traditional credit risk measurement method, namely experts method, credit score model and neural network model; As well as the modern credit risk evaluation model, Including Credit Metrics model, Credit Risk+ model, Credit Portfolio View model, KMV model and so on; Then according to China's national conditions, it discusses in four special modern measure model make applicability analysis KMV model which puts selected is an empirical study on the empirical results, and the analysis shows that discussion in commercial Banks to establish and perfect the internal rating system process, USES the KMV model which puts the feasibility of measuring credit risk, effectiveness and existence deficiency and put forward some Suggestions; In the end of paper summarized and IRB commercial Banks in China's actual application prospect.Empirical aspects, this paper selects 10 industry of Shenzhen,30 listed companies related financial data and market data, use the default distance measuring KMV model which puts the probability of default and compare them. 30 listed enterprise were merit-based financial strength, representative enterprise is abundant, financial condition is good, the default probability of smaller good enterprise; ST strands of enterprise, representative for losses in recent years, financial situation is bad, the default probability big negative enterprise; And the gem enterprise, representative business in a relatively short time, financial strength are weak, default probability of further observation emerging enterprises and growth of SMES. Through an empirical results of these three categories of enterprise of comparative analysis, proof KMV model which puts more intuitive, true to reflect these three categories of enterprise credit conditions.The innovation of this paper mainly embodied in the following aspects:First of all, for the developed countries of the current use of commercial Banks in China credit risk metric model, this paper the applicability of the serious lack of default data in our history and weak efficient market special national conditions, combining various measure model distribution hypothesis, theoretical foundation and parameter selection and practice the advantages and disadvantages of exposure to the comparison and analysis, it is concluded that more suitable KMV model which puts the use of commercial Banks in China conclusion. Its reason is mainly manifested in the theoretical basis down-to-earth, KMV model which puts data requirements easily satisfied (just enterprise little financial data and market data), does not require the efficient market hypothesis, can reflect single enterprise's credit changes and can compare multiple enterprise's default risk circumstance, still can a year for several times, its advantages rating business bank of our country is appropriate for it.Secondly, in the empirical process, based on the actual situation in our country of KMV model which puts a correction, hoping to better reflect our country enterprise credit conditions. Mainly displays in two aspects:(1) model selection of some parameters value. For example, foreign stock market of China's stock market is different, the enterprise existence of non-tradable shares and problems. So in empirical process, by the stock sample enterprise value of non-tradable shares and get up. Among non-tradable pricing, the article chose the full circulation of stocks listed enterprises in the study of method. In addition, so as the risk-free rate, the share price volatility etc., which all did correction, specific please see this article chapter 5 second quarter; (2) the model equations solving aspects. For example, in view of the model of the dual nonlinear equations of simultaneous equations, in order to avoid the interference by some parameters to larger, in this paper the error against the use of Matlab software choice binary nonlinear equations made a iterative method of programming, calculated by Matlab software is used as a convergence value of systems the computational results. Use this iteration programming can draw after repeated computation of a convergence value, so the more scientific and more convenient, have very strong practicability.Again, this article will theoretical and empirical combination, according to China's Shenzhen listed enterprise real financial and market data, using the modified the KMV model which puts listed companies in China was analyzed empirically. This paper not only select a merit-based enterprise and ST strands of enterprise to analysis of KMV model which puts enterprises of good quality and bad enterprise credit conditions reflect the end of 2009, for more allowed the listing for trading in China to analyze the gem enterprise special group of KMV model which puts its credit status report the situation. This is because our country has lots of small and medium-sized enterprises, especially exist many just listed and future listing of emerging enterprises and growth of SMES. For commercial Banks, it is not only an opportunity this part company is, where is the risk of the key marketing customers. Therefore, how to measure this kind of enterprise credit risks and measure accuracy are directly affect our country commercial bank credit risk management quality. Accordingly, this paper especially to our country enterprise of gem to empirically. The empirical results also said the KMV model which puts can not only better reflect our quality enterprises and bad enterprise credit risk status, also can well reflect gem companies credit risk status, very suitable for steady implementation of the IRB use commercial Banks in China.Finally, this paper reflects on the empirical process some problems, and summarizes how reasonable commercial Banks in China using the IRB, establishing a sound credit risk management system of prospect.