A Study Of Credit Risk In Commercial Bank: The Impact Of Macroeconomic Fluctuation On IRB

CBRC requires major commercial banks to follow IRB regulation to improve the measurement and management of credit risk. At the present situation, commercial banks need to study the impact of macro-economic fluctuation on their asset quality and benefit.Base on the research of the implementation of IRB in our country, we figure out two defect of the PD rating system in daily work that it can’t evaluate the impact of macro-economic fluctuation,and that there is a time lag of the annual rating system. Consequently, the PD rating system has a narrow range of application, compared to the external rating system used widely, like the Moody’s KMV system. The two shortcomings also infect the measurement of capital adequacy ratio and the effectiveness of indicators of evaluation.As a solution with balance, we can build internal rating migration matrix base on the PD rating system, and collect the macroeconomic data released by statistic agencies quarterly or monthly. After analyzing and figuring out the relationship between rating migration probabilities and changes of macroeconomic indicators, we can regularly adjust some customers’ internal rating, to solve the lagging problem and the lack of quantitative analysis tools.In empirical analysis, we established an effective PD rating system including two trade sectors of manufacturing and wholesale & retail, by Logistic Regression. And we built the rating migration matrix base on this rating system. At the end, we proved the intrinsic relationship between changes of macroeconomic indicator and downgrade probabilities of rating.Consequently, we suggest building the migration matrix system based on the PD rating system to assist the rating work. In addition, the solution of introducing migration matrix and analyzing influence of macroeconomic fluctuation has reference to other improvements of PD rating system and IRB.