Our Country Commercial Bank Credit Risk Measurement And Management

Commercial Banks face risks including credit risk, the operation risk, market risk,liquidity risk, country risk, reputation risk and legal risk. Credit risk is particularlyimportant, it is more than60%of the overall risk exposure. At present, our country’scapital market is not well developed, and enterprises finance mainly through media, it’s akind of indirect financing method. Credit risk has become the main risk that China’scommercial Banks face. Compared with western developed countries, China’s credit riskmeasurement and management still are in a low level, not yet setting up complete creditrisk management system. Thus, we study our country commercial banks’ credit risk byusing western mature risk management models for reference. It is very significant.Credit risk management is a systematic process, including identification,measurement, supervision and control. Among them, the credit risk measurement is veryimportant, accurate measurement is necessary for effective control and scientificmanagement. Therefore this paper focused on credit risk measurement. This articleintroduces some domestic and foreign measurement methods and tools. Traditional creditrisk management methods include experts method, rating method and credit scoringmethod. However, as the development of financial reform and openness, traditionalmethods are no longer suitable. Then modern credit risk management tools come intobeing. Through comparing Credit Metrics model, KMV model, Credit Portfolio Viewmodel and Credit Risk+model, combining with the actual situation in our country, Ichoose KMV model to make empirical study.This paper expounds the basic framework of KMV model, introduces the theory basisof KMV model-option pricing model.；select8non-ST and8ST listed companies existingin Shanghai stock market at July1,in2011to make empirical study;Use the B-S-M modelto calculate default distance and expected default frequency, with the help of Matlabsoftware; analysis the empirical results. Finally, in the base of empirical results, I putforward some advices for the measurement and management of our country commercialbanks’ credit risk.