| Subprime crisis broke out in2007in the United States quickly swept through global financial markets, triggered a global financial crisis, the continued default of the subprime debt had insanely eroded bank capital, the credit risk,market risk, liquidity risk, and operational risk which was constantly exposed brought a large number of financial institutions to serious losses, the market value has shrunk dramatically, Many investment banks and commercial banks fell into bankrupcy or been nationalized. In the financial crisis, the bank’s risk indicators and risk warning system hardly worked, which did not identify the risk of the subprime debt and wrongly estimate the subprime debt risks.The efficiency of risk management of commercial banks has become the decisive factor in the economic crisis. The bank with a higher efficiency of risk management can calmly deal with the subprime crisis, in contrast, the bank ignoring the risk management falls into deep bankruptcy risk. The outbreak of these risk events are reflecting the failure of bank’s internal risk management and the failures of regulatory agencies ignoring pro-cyclicality of riks indicators. New Basel Capital Accord, the loan loss reserve principles and the pricing principles passed the pro-cyclical factors to the risk management of commercial banks, the risk management efficiency is also showing a pro-cyclical effect, weakening the ability of commercial banks risk management. After subprime mortgage crisis, commercial banks in the world have focused on the efficiency of risk management, seeking more advanced risk management theory and establishing more reasonable risk management system.The subprime debt crisis posed small impact to China’s banking, the reason is the low openness of China’s capital sector, making the domestic commercial banks to hold a limited scale of s subprime debt rather than the higher efficiency of risk management of China’s banking. But more and more commercial banks in China will participate in international market, China’s commercial banks not only have to deal with the domestic market but also the volatile international market, which bings an enormous challenge to the risk management of China’s commercial banks Compared with foreign banks with advanced risk management philosophy, China’s commercial banks with poor risk management ability has to improve risk management capabilities. In the end,waht is the bank risk management efficiency? what should be done to improve the efficiency of the risk management of commercial banks in China?Empirical analysis of the efficiency of China’s risk management is limited, Li Xianping (2010) evaluated the capabilities of China’s risk management using the data of China’s14listed commercial banks, constructed a formula for capabilities of risk control by factor analysis method, but the research angle was limited in the micro-stadge of commercial banks, ignoring to consider the impact of the banking industry-specific factors and macroeconomic cycles. HighGuoHua (2010) identified a positive response of bank risk management capabilities of China’s banking to business cycle with a collection about110commercial banks data during2000-2008,which ignoring the comprehensive risk management of the commercial banks, and the impact of the industry-specific factors. This study of the efficiency of commercial banks risk management will operate in bank-specific factors, industry-specific factors and macroeconomic cycles factors.In this text, Author collects a panel data of48China’s banks during the period2004-2011from global TOP1000banking, including5staje-owned commercial banks,12nationaljoint-stock commercial banks,20city commercial banks, the six rural commercial banks,4foreign banks branch and postal savings banks, accounting for84.7050%of the total assets of the commercial banks in China. The principal component analysis is introduced to build a entity risk factor for China’s commercial banks based on credit risk, market risk, operational risk and liquidity risk. Bank-specific facto,including comprehensive risk factor, industry-specifc factors and macroeconomic cycle factor are the determinants of the efficiency of China’s commercial banks risk management in panal modle. Policy recommendations will given through empirical analysis.The text is divided into six chapters, each chapter within the arrangements are as follows: The first chapter is the introduction, elaborating the major background of the text, pointing significance of this study, and the same time, introducing the method and article innovation. The second chapter is literature review, including three parts, The first is the presentation of the basic concepts, and then introduces development of the commercial bank risk management theory, and finally the latest research of scholars in related fields. The third chapter is the analysis of the risk management of commercial banks in China, the implementation of the Basel II in China’s banking. Chapter IV is research method, according to domestic and foreign scholars in related fields of research, and the characteristics of the risk management of banks in China, regression variables and panel data model are choiced. Chapter V is empirical analysis, introducing the data resources, constructing a entity risk factor for the48sample banks thought principal component analysis, establishing the efficiency of the risk management model based on bank-specific factors, industry-specific factors and macro economic cycle factors. Finally, the empirical results is presented.The sixth chapter summarizes the empirical findings and policy recommendations to improve the management efficiency of China’s commercial banks.The empirical results show that the risk management efficiency of China’s commercial banks is determinated by bank-specific factors, industry-specific factors and the macroeconomic cycle. In terms of bank-specific level, the greater the comprehensive risk factor for commercial banks, the lower the efficiency of risk management, profitability and operational efficiency has positive nexus with risk management efficiency, Market discipline can effectively improve the efficiency of the risk management of banks in the industry-specific level; China’s commercial banks risk management efficiency showed a pro-cyclical effect. During the economic upside, the efficiency of the risk management increased, during the economic downturn, the decline in efficiency of the risk management occurred, the procyclicality of the risk management increased economic cyclical fluctuations. After the subprime crisis, China’s commercial banks risk management efficiency has been significantly improved.Innovations of the text are reflected in the following three aspects:First, the concept of comprehensive risk management is introduced based on credit risk, market risk, operational risk and liquidity risk, including the size of loans, non-performing loans dialprepare rate, the non-performing loan rate, the interest rate sensitive exposures, the total income, the loan-to-deposit ratio, liquidity ratio. Entity risk factor is designed as the regression variables containing more informatione of risk, which can be better explained the differences of risk management efficiency. Secondly, the introduction of the industry-specific factors (bank type, listing and the interaction of the two variables) examine the differences in efficiency of risk management in term of the invisible government guarantees and market discipline. Finally, sample data covered a period2004to2011, which is symmetrically divided into pre-crisis (2004～2007) and post-crisis (2008～2011) by subprime crisis. Aiming to examine whether the the financial crisis would effect efficiency of the risk management of commercial banks in China.Future research in this article can follow two aspects, on one hand, the actual capital adequacy ratio of commercial banks is selected as an alternative variable for efficiency of the risk management, that maybe unreasonable, the spirit of risk management, organizational structure for risk management, risk management team, risk management IT systems and other non-financial indicators should be seleced to assess the efficiency of the risk management of commercial banks. On the other hand, cost of the risk management,which counts a lot, does not be taken into account in this article. This part can also be designed as future research direction. |
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