Analysis On Credit Risk Of Listed Commercial Banks In China And Its Influencing Factors

At present,China is committed to the transformation and upgrading of economic structure.With the deepening of the financial system reform,financial innovation has become a powerful factor in the development of commercial banks.Various financial products have been constantly developed,which bring various financial risks to commercial banks,especially the credit risk.In addition,the real economy run into trouble due to the influence of the downward pressure of the economy,which has been transmitted to the financial fields.The credit asset quality of commercial banks is under pressure,and the non-performing loan ratio presented a rising trend,which lead to the attention of banks and regulators.Therefore,the accurate measurement of credit risk and scientific management has become a highly desirable problem to be solved.However,the traditional credit risk management method was no longer apply to the current market situation and economic environment,but also can not meet the requirements of accurately quantifying the credit risk and scientific management of financial institutions.Therefore,using the modern risk management technology to quantify credit risk is highly desirable and extremely necessary for credit risk management.Due to the maturing of financial markets in western developed countries,institutions and scholars have developed a series of high quality credit risk measurement models such as CreditRisk+,CreditMetricsTM,KMV,and applied them to measure the credit risk of financial institutions,which has achieved a good result.However,China's financial market started late and lagged behind western developed countries in terms of credit risk management and lacked deep quantitative models.Therefore,it is necessary to establish a credit risk management model which suitable for China's economic environment.Because KMV model has a solid theoretical basis and wide application range,which is easy to operate in practice.Besides,according to the assumptions and data requirements of KMV model and the properties of China's stock market and the characteristics of commercial banks,KMV model was suitable for the measurementof China's commercial credit risk measurement.Therefore,the KMV model is employed as a quantitative method for commercial bank credit risk.In this paper,16 listed commercial banks is adopted as the object of case studies,the time span is from the first quarter of 2013 to the first quarter of 2017,and the stock data from the Wind database,while the financial data are collected from the banks of the quarterly statements.In the empirical analysis,we have modified the KMV model based on three aspects,which includes the estimation of expected asset growth rate,the estimation of stock value volatility and the optimization of default point parameters.In detail,the asset growth rate was estimated by the geometric mean of the asset growth factor and the asset growth rate was estimated by the GARCH model,meanwhile the penalty point parameter was corrected by the iterative method.The corrections for each point are compared with the previous model,and then the ROC curve is employed to judge the rationality and accuracy of the correction.The results reveals that the modified KMV model has higher accuracy than the original model in the measurement of credit risk of commercial banks in China.The calculated distance of default can explain the trend and relative size of credit risk of banks,which can be a good measure of bank credit risk situation.Then the influence factors of credit risk of commercial Banks are studied in this paper.For this study,the default distance calculated by the modified KMV model was selected as the representative variable of the credit risk of commercial bank,and the GDP growth rate,the level of interest rates,the relative proportion of bank assets,earnings per share,capital adequacy ratio and asset growth rate were adopted as explanatory variables.The generalized least square method(FGLS)was employed to analyze the panel data of seven variables in 17 seasons.The results show that the coefficients are all significant.Except for the negative relationship between the interest rate and the default distance,the other variables present a positive effect on the default distance.It is proved that the external economic environment and its internal micro-factors have obvious influence on the credit risk of commercial banks.Which is worth the attention of commercial banks.Based on the above analysis,some suggestions for the credit risk management of commercial banks are proposed in this paper.In the discussion of the chapter 5,the testing results of the two macroeconomic indicators are significant,which proves that the external economic environment has certain influence on the credit risk of the commercial banks.Therefore,the attention of the macroeconomic indicators should be improved to prevent credit risks from economic fluctuations.Secondly,some indicators,including the capital adequacy ratio,should be closely monitored to prevent the abnormal fluctuations in these indicators of credit risk due to the internal factors of commercial banks have a greater impact on their credit risk.In addition,the Basel Capital Accord recommended that commercial banks should conduct internal evaluations of risks based on their own risk preferences,data and models.The advantage of internal evaluation is that it combines the characteristics of the banks themselves and is more sensitive to risk.Therefore,commercial banks should strength efforts to import the modern risk management talents and improve their internal evaluation system.For the financial market,to improve the application rate of advanced credit risk quantification technology including KMV model,it is necessary to enhance the effectiveness of securities market constantly and improve the information disclosure system.Moreover,the imperfect credit system and insufficient accumulation of credit data is one of the bottlenecks in the application of most advanced credit risk measurement models in China,which should be taken seriously in future studies.Finally,it should improve the level of external rating agencies and the impartial objectivity of the rating results.