The Research On Internal Rating Of China’s Commercial Bank From The New Basel Capital Accord

Financial risks were born along with financial systems. They go with each otherfor centuries. Credit risk is the oldest and the core of financial risks. After20thcentury,globalization became the topic of the world, and the fluidity, the scope and the speedbetween countries of the international capital was accelerated along with the fastmovement of liberty. At the same time, accumulation of financial risks grew fast, too.Financial developments not only promote the economic growth, but also bring lots ofrisks to the world, especially to China.The research about global financial risks issued by World Bank shows that themain reason led banks to bankruptcy is credit risks. The Basel Capital Accord issuedin1988appeared many defects and limitation during application in real life, andpropose new challenges to financial regulatory institutions. Therefore, Baselcommittee decided to amend the old Basel Accord. After several times’ changes andamendments through highly consideration of the importance of internal rating in risksregulation and capital regulation, the new Basel Accord was issued successfully inJune,2004and officially carried out at the end of Dec.2004. This essay discusses theshortage of internal rating in commercial banks and proposes some suggestionsaccording to these disadvantages, through concrete discussion of the origin, thecontent and the extension of new Basel Accord and internal rating system, as well asthe real application of internal rating system in commercial banks nowadays in ourcountry.This essay includes six parts:Chapter One: Introduction. This part discusses the background and the meaningof the research, the theoretical research and application condition of the research, andthe novel points and research methods of the essay.Chapter Two: This part discusses the necessity of the implementation of internalrating both in the angle of regulatory institutions and the angle of development ofcommercial banks.Chapter Three: New Basel Accord and its effects on commercial banks. In thischapter, it will concretely introduce the development and the main content of newBasel Accord, as well as its effects on capital of commercial banks. Chapter Four: According to internal rating in new Basel Accord, this partdescribes the origin, the development, the meaning, the frame and the central ideainternal rating system, and makes a comparison between new internal rating andtraditional internal rating.Chapter Five: The condition and the problems of internal rating systemsnowadays in our country’s commercial banks. Due to that our internal rating system isstill in the beginning, this part concludes some disadvantages of our country’s internalrating system.Chapter Six: The strategy and the suggestions of internal rating in our country’scommercial banks. This part will propose many suggestions and advices according tothe problems existed in internal rating systems in our country.Chapter Seven: Conclusion. This part concludes the novel points anddisadvantages of the research and points new direction of future research.