The Study On Economic Capital Allocation Based On Credit Risk Measurement Of Commercial Bank

We have done a lot of research on commercial bank’s potential risk (includingmarket risk, credit risk, operation risk, legal risk, reputation risk and so on) andeconomic capital allocation both in and abroad, however, there is little practical thesison capital allocation according to special bank’s risk internal measurement, accuratelyrisk measuring is the headstone of capital allocation, while reasonably allocating thelimited capital to every business is a important approach of strengthening credit riskmanagement. There may be three levels of credit loss, expected loss, unexpected lossand catastrophe loss, they are covered by provision, economic capital and depositinsurance respectively, which have reach an agreement in the previous literature.This paper choose credit risk as entry point, models of credit risk measurementand approach of capital allocation as key research,“risk internal measurement--economic capital allocation--performance evaluation” as principal line, introducing anew approach to measure the three levels of loss, which is more accurately, improvedrating method, value at risk and conditional value at risk measure expected loss,unexpected loss and catastrophe loss respectively, combining loss levels and earlywarning limit, open up a new idea to early warning mechanism; Using linearprogramming design the goals and constraints of economic capital allocation, conquerthe inherent defect of capital allocation based on risk or risk adjusted return on capital,solving the optimal allocation ration while corresponding to value maximization andrisk control; Using simulation approach and experiment to design examples,overcoming the obstacles of related material and data, make the process moretransparent; on the base of depth analysis on credit risk measurement and economiccapital allocation, combine them, solve the difficulties and problems in this logicstructure, striving to clear things and feasible application; finally, put forward thesuggestion on explicit deposit insurance system design and credit informationdatabase construction as a reference.