A Study On The Credit Risk Management Of Commercial Banks Of China With KMV Model

The credit risk has always been the main risks faced by the commercial banks in China. And according to the research from the domestic as well as public disclosure material,the level of credit risk management of commercial banks in China is relatively backward, and the credit rating system cannot meet the requirements of the IRB.Therefore, if China’s banking sector want to remain invincible in the international competition, it is necessary to establish the credit risk management system suitable for China’s economic and financial environment.Based on The Basel Accord, this text studies how commercial banks in China improve credit risk management to meet the requirement of IRB.First, the introduction Comprehensive introduces the research status on credit risk management at home and abroad; then highlights the current status of credit risk and management about commercial banks in China. Secondly, second part describes the definition and characteristics of credit risk, the meaning of credit risk management and the content of the Basel Accord. Thirdly, the third part summarizes IRB and four modern credit risk measurement models, including Credit Metrics, KMV, Credit Risk+ and CPV model. Fourthly, the fourth section firstly compares applicability of four measurement model in the credit risk management of commercial banks in Chinadrawing a conclusion that KMV model have acomparative advantage on credit risk management of commercial banks in China. Then the text do the empirical research on KMV model and analysis the empirical results.Final, the writings put forward several suggestions on improvement credit risk management of commercial banks in China.This paper put to use the combination quantitative analysis method not quantitative analysis method and comparative analysis to study credit risk management of commercial bank in China, and do the theoretical analysis and empirical analysis on four modern credit risk measurement models. About the empirical research, this text selected 10 industries,20 listed companies related financial data and market data in equity market in Shanghai and Shenzhen, and use the default distance to Measure KMV model which count the probability of default and compare them. By the analysis of empirical results, the conclusion is drawn that the KMV model is able to more accurately measure the credit risk of the listed companies in China.