An Empirical Research On Risk Assessment Of Commercial Banks In China

Commercial banks are high-risk and important financial institutions, with risks affecting the stability of economic and society. During the period of the 12th planning, however, Chinese commercial banks will face an increasingly severe situation which risks are more complex because of more market-oriented interest rates and further improved capital market. So strict requirements on Chinese regulators are needed. In this context, risk evaluation system for commercial banks formulated by Chinese regulators fails to meet the requirements of the times. Therefore, improving the risk evaluation system for commercial banks if of great significance.The theoretical part studied the characteristics of commercial banks and their risks, classifying the risks of commercial banks by inducing factors, then analyzed the concept, origin, regulatory requirements and status of each risk. In the empirical part, a risk evaluation system for commercial bank was set up to assess the comprehensive risk of 16 listed commercial banks in China based on indexes chosen to evaluate each kind of risk. In order to better explain the specific risk level of Chinese commercial banks, data of five foreign commercial banks chosen from the top 30 banks around the world was used as the basis of comparison. Then, each kind of risk was graded respectively by the factor analysis method, and entropy method was used to give a comprehensive score for each commercial bank’s. Finally the research results showed that commercial banks in China had a low risk level, and joint-stock commercial banks had a higher risk level than that of state-owned commercial banks. More specifically, in terms of specific risk, capital risk and operational risk of Chinese commercial banks were higher than that of foreign commercial banks, and credit risk and profitability risk is better than that of foreign commercial banks. Even so, we also should be paid attention to them because this advantage will be difficult to maintain when the marketization of interest rates is further in the future. At last, commercial banks and regulators are proposed respectively according to the research conclusion.In terms of present study, risk assessment system for commercial bank in most literature couldn’t measure of main risk types roundly. In this paper, the possible innovation point lies in following aspects:(1) operational risk is involved in the evaluation system. In the system, operational risk is indirectly evaluated and scored by a subjective method considering operating risk disclosure, internal control, measurement and other aspects, which will be more comprehensive. (2) Market risk is quantized. In the index system, index concerning interest rate and exchange rate is chosen to measure market risk, which is comparatively comprehensive. (3) Contrast data is added. Some large international commercial banks are selected as the contrast data to detail the current risk level of commercial banks in China convictively.