The Empirical Research Of Stress Testing In Credit Risk On Commercial Banks

As we all known, finance is the core of modern economy,a stable and healthy financial system plays a vital role in the development of the country’s economy.meanwhile, the financial industry has a high debt, system vulnerability and the risk of infectious characteristics.So it’s the project which is significant to the monetary authorities that How to assess and prevent potential financial risks.As for our nation’s financial system, Indirect financing plays a significant role in the fiance system, so it’s a very meaningful project that how to prevent and control credit risk of commercial banks.Currently,VAR is the most widely deployed commercial banks risk management tools.it can be a good method to measure the risk of banking institutions in a normal market situation. But it can’t measure the accident which has little probability to happen and with serious bad impact.it’s the strees testing that can measure such accident,so it’s widely used after the financial crisis.Stress testing has lots of advantages,such as providing a forward-looking risk assessment, overcoming the limitations of models and historical data and measureing the bank’s liquidity in scientific way.So we often combine the stress testing and VAR as a whole picture of risk management.In this paper,I’d like to use the method of stress testing and set up a multiple regression model between the rate of bad loans and macroeconomic indicators to analysis the impact of Macroeconomic shocks to commercial banks in our country.The main contents of the chapters are as follows:Chapter1,Introduction. This section focuses on the meaning and context of article topics, combing the stress tests of the research literature, and making an overview of research ideas and frameworks.Chapter2,overview of stress testing.This section talks about the Concepts and classifications of stress testing,the relationship between VAR and stress testing, The international application of the stress testing,the development of stress testing in our nation and the steps and methods of stress testing.Chapter3, the methods of stress testing in credit risk.This section introduces the concept of credit risk, the situation of credit risk management in our national, The impact of macroeconomic factors on the banks credit risky and the method of the stress testing in Credit risks.Chapter4,credit risk stress testing empirical analysis in China’s commercial banks.this section can be concluded as falsie:Firstly, establishment a multiple regression model between the rate of bad loans and macroeconomic indicators. Secondly, determining the values of the macroeconomic variables in the risk of moderate and severe impact by correlation analysis and scenario simulation.Thirdly,Using the datas of Shanghai Pudong Development Bank, Minsheng Bank and China Merchants Bankblue to analyze the ability of risks resilience.Chapter5, research findings and policy recommendations. This section summarizes the results of theoretical and empirical research and give advice to our nation’s stress testing practices.The innovation of this paper is mainly reflected in the following three aspects:Firstly,in terms of model selection.I choose Wislon credit risk stress testing models to calculate the changes in the rate of bad loans in the case of shocks.Then I use the Wislon model combined with the IRB to calculate the lost under pressure shocks of the three banks.Secondly, In terms of methods of stress testing. In order to make more scientific and accurate set of test scenarios,I combine situational method, correlation analysis and actual macroeconomic phenomena to determine macroeconomic stress scenarios estimate.Thirdly, combining with the actual situation of China’s economic when Selecting the macroeconomic variables.