Comparative Analysis On Risk Evaluation Systems Of Commercial Banks Between China And The United States

As an important part of risk supervision on commercial banks,risk evaluation not only helps to promote the stable development of the financial system,but also provides valuable reference and suggestions for banks to improve their own asset quality,prevent various risks and achieve efficient operation.Around the world,banking risk evaluation in the US started earliest and is now the most mature.The CAMELS rating was proposed in the 1970 s and is adopted as a fundamental method by many countries.The relevant research started late in China yet has made some progress.The risk evaluation index system has been continuously updated,various measures on risk control have been implemented,and the Regulations on Deposit Insurance has been launched,all of which have brought the level of banking risk supervision in China onto a new stage.This paper mainly analyzes the similarities and differences of risk supervision,control and evaluation index systems of commercial banks in the context of China and the United States.The importance of risk evaluation for the healthy operation of financial system and the entire economic environment will also be discussed.Since the evaluation index systems currently adopted by Chinese and US banking regulators are broader than that of commercial banks,this paper will first establish risk evaluation index systems for American and Chinese commercial banks each,with method of Analytic Hierarchy Process(AHP),based on existing regulatory models and previous literatures of the two countries.Then,the two systems are applied to the risk evaluation analysis of 23 representative commercial banks from China and the United States,with a combined method of AHP and Fuzzy Comprehensive Evaluation(FCE).The difference in scores of a same bank,as well as the overall similarities and differences of the two systems will be discussed,to find out their characteristics and feasibility under different economic background.In view of the shortcomings and strength of China's index system,this paper puts forward the improvement measures of China's index system and provides suggestions for the risk supervision of commercial banks in China.Through the research and comparative analysis of two index systems,we find that China's commercial banking risk evaluation index system is founded on the basis of the US index system and specific national conditions.Also,the overall system building method and some indexes are similar,while the evaluation criteria of the same indicators can be different,with some Chinese indexes adopt more advanced provisions than the American and international regulations.However,China gives relatively greater weight to qualitative indicators and a less options of quantitative indicators,compared with the US system.What's more,China's evaluation system is too transparent in the actual application process,which might not be a long-term strategy,although it could serve as a good guide for the banking industry in the early stage of implementation.Looking back at the US system,with the mode of combining main and accessorial indexes,the more attention and greater options given to quantitative indexes,as well as the much more flexible pattern in the implementation process,it plays a better role in banking risk supervision and prevention,in the long run.