Research On YC Bank Bond Credit Risk Internal Evaluation System Design

Since 2014,Chinese bond market has experienced frequent bond defaults along with the gradually increasing proportion of bond investment in bank assets in recent years.According to above situation,this paper mainly focuses on the current credit risk under special economic environment,especially the risks caused by current bond credit rating of small and medium-sized banks relying too much on the rating results from external rating agencies,which makes the actual situation of the bond credit risk distorted.By using the typical example,YC Bank,as a representative of small and medium-sized bank.Based on the findings,the paper provides insights about establishing an internal evaluation system for bank bond credits to evaluate the credit risk status of enterprises more comprehensively and objectively and establish a strict firewall for bond investment,which will benefit of reducing bond investment risks and reducing default losses.Based on certain theoretical basis,this paper comprehensively applies qualitative analysis,quantitative analysis and case analysis methods.Firstly,through literature review and theoretical review,the theoretical foundation for the follow-up research is strengthened.Secondly,the analytic hierarchy process and the expert scoring method are taken to build an internal evaluation system for bond credit risk evaluation.Thirdly,the established internal evaluation system of bank bond credit risk is operated and compare the evaluation results obtained with those of a third party,trying to find out the cause of the difference and analyzing the rationality of the difference.Besides,within the acceptable range of the difference,the analysis result should be combined with the risk preference of YC bank,which means unifying the original internal bond credit risk assessment system with the risk tolerance of YC bank to confirm the ultimate internal evaluation system of YC bank's bond credit risk.Finally,the safeguard measures for the implementation of the YC Bank Bond Credit Risk Assessment System are proposed.According to the research conclusion,the internal evaluation system of YC bank's bond credit risk consists of 39 indicators of five sub-systems,namely,the debtor's industry index sub-system,the debtor's enterprise index sub-system,the debtor's financial index sub-system,the debtor's credit enhancement index sub-system and the bank's internal adjustment index sub-system.In addition,compared with the external evaluation results,to some extent,the skewed distribution of ratings is reduced,which can reflect the risk preference of YC bank for individual bonds better.It is obviously that the system is used to identify the credit risk of "17 Shanghai huaxin SCP002”.That further proves the rationality and applicability of the designed internal bond credit risk assessment system.