A Study On Credit Risk Management Of Commercial Banks In China Based On KMV Model

The credit risk has always been the main risks faced by the commercial banks inChina.And according to the research from the domestic as well as public disclosurematerial,the level of credit risk management of commercial banks in China isrelatively backward, and the credit rating system cannot meet the requirements of theIRB.Therefore, if China’s banking sector want to remain invincible in theinternational competition, it is imminent to establish the credit risk managementsystem suitable for China’s economic and financial environment,which can not onlylook for ways to reduce requirements of risk capital,but also can establish scientificmeasurement and management on risk faced by bank to achieve the purpose of therational allocation of scarce capital.Based on The Basel Accord,this text study how commercial banks in Chinaimprove credit risk management to meet the requirement of IRB.First,theintroduction Comprehensive introduces the research status on credit riskmanagement at home and abroad.Secondly,Then second part describes the definitionand characteristics of credit risk, the meaning of credit risk management and thecontent of the Basel Accord. Thirdly,the third part summarize IRB and four moderncredit risk measurement models, including Credit Metrics, Credit Portfolio View,KMV, Credit Risk+model. Fourthly, the fourth section highlights the current statusof credit risk and management about commercial banks in China.Fifthly,the fifth partfirstly compares applicability of four measurement model in the credit riskmanagement of commercial banks in China,drawing a conclusion that KMV modelhave a comparative advantage on credit risk management of commercial banks inChina.Then the text do the empirical research on KMV model and analysis theempirical results.Final,the writings put forward several suggestions on improvementcredit risk management of commercial banks in China.This paper put to use the combination quantitative analysis method notquantitative analysis method and comparative analysis to study credit riskmanagement of commercial bank in China,and do the theoretical analysis andempirical analysis on four modern credit risk measurement models.About theempirical research,this text selected10industries,20listed companies relatedfinancial data and market data in equity market in Shanghai and Shenzhen,and use the default distance to Measure KMV model which count the probability of defaultand compare them.By the analysis of empirical results,the conclusion is drawn thatthe KMV model is able to more accurately measure the credit risk of the listedcompanies in China.