The Empirical Study Of Stress Testing In Credit Risk On Chinese Commercial Banks Based On Wilson Model

Currently,subject to the macroeconomic downward pressure and the real economic difficulties.China’s commercial bank asset quality is facing a new round of bad pressure,which is basically in line with the law of procyclical evolution of bank asset quality.Although China’s banking system’s non-performing loan rate is still at a low level compared to global banking industry,with the process of reducing productivity,leverage and inventory,it is possible to put pressure on the quality of bank credit assets from various aspects.China’s bank credit asset quality management capacity will face the pressure and test of macroeconomic and financial environment changes for some time to come.In the process of large-scale credit expansion since the end of 2008,the bank’s new credit mainly flows to the local government financing platform,real estate industry and other upstream enterprises of fixed assets investment.Government’s promotion of economic restructuring is precisely through a variety of measures to gradually digest the serious overcapacity of these enterprises,the important measure is to control the credit needs of these industries,banks will inevitably bear the downward pressure on asset quality.Since the third quarter of 2011 to the fourth quarter of 2016,the bank’s non-performing loan rate has been rising.Bank’s write-offs and 90-day overdue loans have experienced a surge,the problem will be further exposed in 2017.In addition,although the bank only take the proxy liability issued by their own financial products,but if there are risk events,from the perspective of maintaining social stability,banks are more likely to undertake compensation liability.Therefore,from this point of view,it is of great practical significance to explore the impact of macroeconomic variables on the non-performing loan ratio of commercial banks in China,and put forward the corresponding policy recommendations.This paper is divided into three main parts:The first part is theoretical analysis,which is mainly composed of three parts:Firstly,the background and significance of the research topic are introduced,and combing both domestic and foreign related literatures on the macro stress testing;Secondly,the theory of credit risk and the theory of stress testing are expounded;Thirdly,this paper sums up the relevant contents of Basel Ⅲ,with emphasis on the analysis of the application of the new regulatory standards in Basel in China.The second part is empirical study,this part is based on the improved Wilson model,and selects the data from 2005Q1 to 2016Q4 in China’s commercial banks to conduct empirical analysis to examine the impact of macroeconomic variables on the NPL ratio.According to the characteristics of China’s commercial banks and the actual situation of macro economy,the selected macroeconomic explanatory variables are:Growth rate of GDP(GDP),Growth rate of Broad money(M2),Growth rate of Export value(EX),National housing climate index(NRCI),Growth rate of consumer price index(CPI),Public revenue public revenue(PFI),Fixed asset investment price index(FAI),Growth rate of total retail sales of social consumer goods(RS),Growth rate of industrial added value(AVI)and One-year benchmark lending rate(SLR).Analysis results show:PFI,SLR,NRCI and FAI have a very significant impact on non-performing loan ratio.Among them,PFI,SLR and non-performing loan rate are positive correlation,NRCI,FAI and non-performing loan rate are negative correlation.The third part is the stress-testing process:this paper is mainly based on the empirical analysis of the model of the pressure test,and it sets three different scenaros,which includes a light impact,moderate impact and severe impact.The stress-testing results show that China’s commercial banks’ non-performing loans is expected add to 2 trillion and 249 billion 344 million yuan under the scenario of severe impact by the end of 2017,737 billion 144 million yuan higher than the end of 2016,rose to 48.75%.It is expected that the provision coverage ratio of commercial banks in China is 133.16%in 2017,indicating that the overall credit risk of the banking sector is relatively stable,but it was 29.45%lower than in 2016.