Our Commercial Bank Credit Risk Management Based On KMV Model

Since always, credit risk is the main risk faced by the commercial banks.The accurate measurement and effective management of credit risk, is not only beneficial to the stable operation and healthy development of the commercial banks, but also beneficial to the stability of the whole financial system and the sustained, stable, healthy and rapid development of the national economic. In the new situation of financial globalization, China’s banking sector is gradually opening up.On the one hand,the challenges of international competition have become more critical; on the other hand, because all kinds of financial derivatives have began pouring into our country’s financial market, credit risk faced by the financial institutions are more and more complicated and diversified. In addition, China’s real estate credit risk rises sharply, local financing platform loans cause credit risk, the end of the WTO transitional period and the Basel III bring new challenges on the credit risk management of commercial Banks in China,and so on, all these shows that China’s commercial Banks to increase credit risk management level is so important and urgent. However,relative to the perfect risk metric system set up by foreign Banks, with the China’s historical and institutional reasons, the management of commercial banks’ credit risk in China is still more qualitative-based credit risk management. the credit risk management measurement has just started. Therefore, having researchs in credit risk management and improving our commercial bank’s credit risk management level is the important topic to handle in chinese commercial banks.This paper first analyzes the current situation faced by China’s commercial banks to credit risk management, then the paper points out the problems of China’s commercial banks to manage credit risk. Come to analyze the current situation of China’s commercial banks to manage credit risk, commercial banks in China should learn from the advanced credit risk management experience and ideas, introduce and develope credit risk measurement models suitable for China’s commercial banks. Then, this paper analyzes the advantages, disadvantages and the feasibility in China of the famous modern Credit Risk evaluation Model (KMV Model, CreditMetrics Model, Credit Risk+Model and Credit PortfolioView Model) in the international comparison. It concludes:at present, our country commercial bank would consider KMV Model putting to join the research scope of the credit risk evaluation model. The paper not noly does horizontal comparison analysis of the distance default about the16listed companies in the same year, but also tracking and longitudinal comparative analysis of distance default about the single stock on many years,then it show that the KMV model in our country has got to feasibility. Banks can improve their discrimination accuracy of the high risk customers and low risk customers by KMV model.According to the listed company stock trading data in real time, banks can calculate the numerical of default distance and default rate by KMV model, and always focu on the company’s risk change, so they can take some strategies and remedial measures as soon as possible.