Research On Credit Risk Management In Commercial Bank On Stress Testing

In recent years, credit risk has been the primary risk in the process of bank operation. After 19 century, on the account of continuous innovation,continued expansion of credit risk on financial tools, the relevance between credit risk and other bank risks become stronger and more hazardous. Especially the American subprime crisis which outbroke in 2008, the basic reason was that the credit risk on mismanagement of some banks in the U.S which finally evolved into a global financial tsunami. The traditional credit risk management methods and measure models could not meet the current commercial bank's end development needs. How to comprehensively and effectively manage the bank credit risk are the primary work and the most valuable research on the whole countries banks.The paper is based on modern commercial bank credit risk management theory comprehensively and systematically analyzes the development of credit risk process and main characteristics, summing up 4 representative models and determining the CPV model are the most suitable one to measure the credit risk on Chinese bank institutions. On that basis, the paper uses the stress testing techniques to make an empirical analysis on the credit risk of commercial banks which is based on two aspects "bank regulators" and "bank branches" First of all, the paper establishes 4 macro-credit model which are GDP growth, consumer price index, cash in circulation growth and the three-year U.S. treasury rate, then carried out stress tests analysis; secondly, for bank branches in stress test, the paper from the angel of business and based on the KMV model, set the default distance as a credit risk metric, then by doing experimental simulation it can be concluded that the GDP growth, the ROE and the output of enterprises have obvious influences on the default distance; finally, on the basis of empirical analysis, the paper proposes the suggestions on strengthening the stress testing technology which is applied in the financial sector promotion in order to strengthen the management on financial risk quantification and improve the whole Chinese banking institutions on risk management.