China's Commercial Banks' Economic Capital Allocation

At the end of the last century, under the background of global economicintegration, the European and American countries gradually relaxed on the regulationof commercial banks, a lot of research and development are a high risk of financialderivatives. On the one hand, in the international financial environment has changedcircumstances, financial mergers and acquisitions continue to occur, the increasingcompetition among banks, asset scale has been expanding to become the main themeof banking business; on the other hand, the enterprise relies on credit businesscontinues to decrease, financial disintermediation arise. The bank to undertake thehigh risk cost, to expand new markets, but not on the potential risk of possible loss toprovide corresponding level of capital supplement. When the macro economy isdeteriorating, the banks may funding cain breaks occur even in crisis.In fact, the venture capital scale and structure of the corresponding noncoordination is the root of the financial crisis. The Basel Committee as the world’smost authoritative banking regulators, in2004formally promulgated the "new BaselCapital Accord", the new deal bank on its capital to conduct a comprehensive analysis,to realize the importance of comprehensive risk management. The deep connotationreflects the importance of bank capital management. Capital is the foundation ofcommercial bank management and development, affect the risk of commercial bank’sability to resist, and ultimately determines the sustainable development ability ofcommercial banks. In recent years, in the capital management of commercial banks inthe banking practice, gradually formed a new means of capital management,economic capital management, and allocation of economic capital management as themost important part of the economic capital management received attention. Theallocation of economic capital management aims to measure the risk accurately, andthe limited resources reasonable allocation to the business of the bank, and strengthenrisk management. This paper is in the home and abroad economic capital theory and the theory ofeconomic capital allocation based on the allocation of economic capital, according tothe practical experience in recent years, combined with China’s reality, analysis of theefficiency of the allocation of economic capital of commercial banks in China, andthen come to countermeasures and suggestions to improve the allocation efficiency ofChina’s commercial bank economic capital.This paper is divided into six chapters.The first chapter is introduction. Briefly in this paper, the research backgroundand significance, and related literature review, this paper expounds the innovationsand deficiencies of the article. The second chapter summary of commercial bankeconomic capital allocation. First introduces the three ways of economic capitalallocation, as the economic capital measurement is the basis of economic capitalallocation, so this chapter according to the type of risk of economic capitalmeasurement was introduced in detail, then to commercial bank economic capitalallocation and its RAROC as the core of performance appraisal system are introduced,set the stage for the fourth chapter the empirical part. The third chapter our countrycommercial bank economic capital allocation situation and the main problems. Thischapter is divided into two large, the first part introduces the present situation of ourcountry commercial bank economic capital allocation, due to the empirical partrespectively from two state-owned commercial Banks and joint-stock commercialBanks, so this chapter respectively to the current situation of the state-owned,joint-stock commercial Banks in China are expounded. The second part analyzes themain problems of our country commercial bank economic capital allocation. Thefourth chapter is based on RAROC fluctuations in the empirical analysis our countrycommercial bank economic capital allocation efficiency. This chapter is the focus ofthis article, using the RAROC model to analyze our country commercial bankeconomic capital allocation efficiency. On the basis of the third chapter our countrycommercial bank economic capital allocation, the problems of using the econometricmodel is suitable for our country commercial bank itself to carry on the empiricalanalysis. Through empirical analysis it is concluded that to improve the efficiency of configuration, the result of the commercial Banks in China need to expand the scaleof the assets of the business, capital more configuration among the assets of thebusiness. The fifth chapter for improving the capability of our country commercialbank economic capital allocation management countermeasures and Suggestions.Through the third chapter main problems of our country commercial bank economiccapital allocation in the fourth chapter and the result of empirical analysis, putforward the corresponding countermeasures and Suggestions.