Research On Macro Stress Testing Of Commercial Banks' Credit Risk In China

As the economy in the world continues to grow and develop, the types of financial products continue to surge so greatly, enhancing the liquidity of trade and making the barriers reduced, improving the efficiency of financial services and capital flow operation greatly, but also making the global financial markets closer together. But everything has its two sides and with the global financial markets becoming closer, the financial crisis also increased the frequency of occurrence. For decades, a total of 93 countries and territories have 112 systemic banking crises, and most of the serious financial crisis erupted in 2007, affecting a wide range of people around the world brought to the very serious condition. At the time in 2008 when this financial crisis began out of control, even if the central bank in many countries repeated invested heavily in the financial markets, also unable to stop the spread of financial turmoil and destruction of power, while several large financial institutions have been closed down or been taken over by the government. This shows not only the financial crisis undermine a country's economic stability, but also bring a wide range of devastating spread of the chain reaction of the global total loss of wealth. So we solved the problem that how to assess the risk properly and control risk reasonable.Stress testing is an analysis method of quantitative risk that can measure the ability commercial banks can afford in the hypothetical case of extreme events. The credit risk, market risk, liquidity risk and operational risk of a commercial bank can be measured by stress testing methods. Stress testing has been widely used in foreign countries and foreign government authorities, and has become an important way to financial stability. The Basel Committee suggest that stress testing should be incorporated into an important part of comprehensive risk management and become an important supplement to the internal rating models. Explicitly in the requirements of BaselⅡthat as the financial institutions building internal models, they must conduct stress tests regularly. Therefore, in-depth study of the practices and application of stress testing in the credit risk management that the actual situation in our country, in order to explore and perfect for the pressure testing in the system of banks, and to make a importance to conduct a comprehensive system of risk management theory.Our country is still in the early stages of economic development, the financing of enterprises are still the main channel of the bank financing, so it is very important to enhance the credit risk of the commercial banks to conduct stress testing of credit risk management. Recently, the status quo of credit risk of the commercial banks in China is:a huge amount of bad loans, poor management infrastructure of credit risk, the capital adequacy ratio is not satisfied, bad debt reserves and low status. Although non-performing loans and bad loan ratio are "double down", but it is still far away from our goal, we need to continue to make the gap closer between China's commercial banks and the international advanced in technology, management and ideas. Especially after-joining in WTO, China's financial industry faces the challenges from global financial, we must study how to measure and monitor the use of traditional methods can not measure the financial risks. Therefore, stress testing used in China have an immeasurable effect to promote the use of risk management system of commercial banks. Stress testing of commercial banks is still in the exploration and the initial stage in our country, limited by the lack of experience and talent shortage, stress testing of commercial banks in our country have sufficient understanding of the use of models and methods, the application of stress test results is not strong.The main line in this paper is stress testing, through the five sections to illustrate the stress testing in applications and management of the credit risk in the commercial banks in China, and looking forward to proposing the feasibility of operation in China's banking industry based on the contribution of foreign scholars in the summary. The main method in this article is "asking questions, analyzing and solving problems ", that is "Why should we choose stress testing to measure credit risk----the theory of stress testing----the model of stress testing---the management of the stress testing in the credit risk of the commercial banks in China". To illustrate the stress testing used in credit risk management of commercial banks in our country, we need to use the theory with practice, from the qualitative and quantitative analysis,empirical analysis respectively. This paper consists of five parts:The first part of the article is introduction. Section I is the background and significance of the topics, Section II summary the introduction of domestic and international, sum up the contribution of foreign and domestic scholars; and then present the framework and methodology of this research, innovation and inadequate. The second part of the article is the necessity and feasibility of the implementation of stress testing. The third part is the theoretical analysis of stress testing used in the credit risk of commercial banks. The fourth part is the empirical analysis of the stress testing used in the commercial banks in our country. The fifth part of the article is to make policy recommendations to improve the management of the credit risk of commercial bank.