Stress Test Of Commercial Bank’s Real Estate Credit Business: Theory And Practice

Along with the adoption of the new Basel Capital regulatory accordamong China’s commercial banks, the formal implementation of"Commercial Banks’ Capital Management Approach" raised higherrequirements to the credit risk management of commercial banks in china.In order to guarantee the effectiveness of the regulatory capital adequacyratio under extreme market conditions, stress test, sensitivity analysis andother methods will be important supplementary measures of riskmanagement for commercial banks. Since the global financial crisis, thereal estate industry becomes the focus industry of china’smacroeconomic regulation, the slowdown of macro economy and thetight policy regulation will inevitably have a substantial impact on thereal estate industry. Whether the credit risk of real estate enterprisescould lead to a systemic risk contagion and then impact the asset quality of commercial banks should cause great attention of bank managers andthe banking regulatory departments. This paper analyzes the riskcharacteristics of Chinese real estate industry, expounds the necessity ofdeveloping stress tests on commercial bank’s real estate credit business;and then determines the key factors affecting the real estate business(pressure variables) through the analysis of real estate industry’scharacteristics, analyzes the influence of pressure variables on the realestate business’s cash flow through stress tests for different types ofcredit products, measures the credit risks that may be faced bycommercial bank’s real estate credit products and personal client creditproducts that related to real estate industry. Based on the these analyses,this paper put forwards some recommendations on the operationalmanagement of real estate credit, including refining standards anddeveloping classification guidance rules of real estate enterprises;strengthening commercial banks’ financial and capital managementrequirements, improving the ability of commercial banks to resist the riskof expected loss and unexpected losses.