Research On Measuring TheCredit Risk Of Commercial Bank In China

Essentially, Commercial Banks arefinancial institutions of operating risks which is also the fundamental means for profit. Yet the credit risk has been a major risk faced by commercial banks. Therefore, the ability of effectively managing and controlling credit risk has directly determined whether commercial banks can survive and develop healthily and substantially. In recent years, with the reform of Chinese financial system and the open of financial sector, China’s commercial banks have gradually realized the importance of credit risk management, meanwhile gradually established a credit risk management system. However, due to the special nature of China’s economic environment, as well as the drawbacks that were formed during the development of commercial banks, the credit risk measurement technology of China’s commercial banks is relatively backward.Hence, it is an urgent need for them to draw on advanced international credit risk management techniques and find out suitable credit risk management techniques for Chinese commercial banks, thereby strengthening the recognition, prevention and control of credit risks,enhancing the management level, as well promoting the healthy and stable development of commercial banks.Based on a comprehensive analysis of the significance of commercial bank credit risk measurement and research status, this paper systematically describes the theories about the commercial credit risk and metrics in the first part. Then through the comparative analysis of the advantages and disadvantages of different types of commercial bank credit metrics and models, and the analysis of the applicability of each measurement model in China’s commercial banks, we find that the applicability of Logit model comes strongerin our country at this stage. Finally, this paper chooses the68listed companies from Shanghai and Shenzhen Stock Exchange in China A-share market as the research sample, of which34*ST companies,34non-*ST companies. After collecting the primary financial indicators and data, using the independent samples T-test (retained14financial indicators) and principal component analysis (extracted four principal components),this paper eventually established a Logit model and verify the validity of the model through SPSS17.0. The empirical results show that the discriminant accuracy rate of*ST companies is79.41%using the model, the non-discrimination accuracy of*ST companies is82.35%, the total rate ofcorrect prediction is80.88%.This paper also concludes that Logit model based on four principal components extracting from financial indicators is very effective to determine the credit risk of default and should be introduced in practice.