The Research On Risk Management Of Green Credit Business Of China’s Commercial Banks

Owing to the countries around the world have overemphasized economic development and neglected ecological issues,carbon dioxide and other greenhouse gas emissions have increased,leading to global warming.Controlling carbon emissions has gradually become a top priority.Green development is an available method to resolve the problems.The financial industry represented by commercial banks can provide financial services for green development.With the development of the low-carbon economy,green credit has gradually become an important financial innovation area for commercial banks to help the development of low-carbon economy.Scientific and reasonable risk control is the key for commercial banks to participate in this financial innovation.This thesis defines the meaning of green credit and its risks,and elaborates on its characteristics and causes.It concerns the risk analysis of six Chinese banks which are involved in green credit.Factor copula is introduced to simulate the corresponding credit risk and market risk by latent variables in an indirect method.In short,the four common factors in green credit – exchange rates,interest rates,CER price,and Brent oil prices – are analyzed and explored in factor copula approach that incorporates KMV,GARCH models in two steps.The KMV and GARCH models are used to generate data that reflects the overall credit and market risk associated with each bank.Both normal copula and t-copula functions are used to simulate the parameter estimations for comparison in a new way.The value at risk for each of the six banks is calculated through a Monte Carlo simulation and compared.Additionally,this thesis calculates shock estimates for each factor to explore the changes in both credit risk and market risk given economic shocks,also makes a hypothetical analysis of the impact of the financial crisis on common factors.Finally,according to the risks faced by China’s green credit,countermeasures are proposed from the level of commercial banks and government supervision.In conclusion,the thesis reveals that exchange rates and oil prices are the key factors to consider in green credit.Ping An Bank is facing the most risk of all the banks in the sample,while the Industrial and Commercial Bank of China is carrying the least risk.The credit risk and market risk of green credit of state-controlled banks are basically superior to joint-stock commercial banks.