The Credit Risk Evaluation Method Of Loans Of Non-manufacturing Listed Companies

Credit risk is also known as default risk, is the core of management loans of commercial banks. Thefinancial crisis in 2007 triggered by subprime mortgage crisis essentially was a credit crisis. Nottimely accurately measure credit risk，banks may suffer huge losses. With the gradual opening ofChina’s banking industry and continuous developing of capital markets, it is particularly importantto our commercial banks effectively measure credit risk.Our country is facing economic transformation, non-manufacturing companies will be increasingcontribution to GDP. At present, no specific credit risk assessment methods to the loans ofnon-manufacturing enterprises. Chinese commercial banks adopt risk-degree approach to manageloans, use IRB to evaluate the company’s credit rating. We are in the third stage of IRB-- evaluatingthe credit status of enterprises by scoring. This method when determining indicators and weights isvery strong subjective. Thus it is necessary to research the credit risk evaluation method ofnon-manufacturing listed companies.Firstly, the paper introduces from Altman’sZ"scoring model, the model is designed to evaluate thecredit status of non-manufacturing business. However, different companies and industries indifferent countries, weights and indicators are different. Therefore, this article amends the model.Using Chinese non-manufacturing listed companies as the object of study and selecting all of thenon-manufacturing listed companies which were treated at the last three years, establishing thescoring models for non-manufacturing listed enterprises of our country. We can use the revisedscoring model to calculate Z value, so we will be able to use it to determine the credit rating to suchof enterprises.Credit Metrics model is used to evaluate the value of the credit risk of loans, which is based oncredit rating. If there are lack of data related to credit rating，it is difficult for Credit Metrics modelto play its due role. The revised scoring model can evaluate the credit rating of ournon-manufacturing listed enterprises Therefore, combining the revised scoring models with theCredit Metrics model can be a good method of evaluation to the credit risk of non-manufacturinglisted companies. As Credit Metrics model assumes that the loan is normally distributed, there is a“fat tail phenomenon”issue. So, the paper uses Monte Carlo simulation to improve the method ofcredit risk assessment method of combining the revised scoring models with the Credit Metricsmodel. Take two loans for example, compare the calculation process and results of the credit riskevaluation method before and after improvement. Results show that the credit risk assessmentmethod improved by Monte Carlo simulation simplify the calculation process，effectively solute the "fat tail phenomenon" of the Credit Metrics. As some data are randomly generated of Monte Carlosimulation, which ,to a certain extent, solve the lack of credit rating data problem of the Chinesecapital market. The credit risk assessment method improved by Monte Carlo is more suitable forevaluating the credit risk of loans of non-manufacturing listed enterprises of our country.Therefore, the credit risk evaluation method of the revised scoring model combined with the CreditMetrics model which is improved by Monte Carlo simulation has theoretical and practicalsignificance.