| The economic capital was advanced by the New Basle Accord in 2004, and it is becoming the advanced concept in practice. To be strict, the economic capital is not a financial concept, and it can not be reflected in Balance Sheet. People create the dummy concept to fulfill the management about risk, so it is also called capital of risk. Generally, economic capital equals to the unexpected loss (UE) quantitatively. As to the management about economic capital, it means using the capital to restrict the rise of assets which is risky at the base of the measurement of capital, controlling the economic capital and insuring to gain the necessary return, in order that the development,benefit and the risk burden can harmonize. At present, the hidden risks have been exposed. In face of competition and challenge brought by foreign financial institutions after entering WTO in 2006, the commercial banks should focus on management on capital at risk, change the way of development, enrich the capital, and reach the 8% capital adequacy which ordered.This paper aims to explain the importance of implementing the management on economic capital。The paper describes the concept of different capital in detail, expatiates the principle of management on economic capital and their distribution. At last, I mention the difficulties of the process, and then summarize the principles and methods. The first part of the paper describes four different concepts about capital—generalized, narrowed, supervised and economical concept. The second part summarized the track of capital administrant theory of Western banks. The third part introduced the effect about the management and distribute on capital at risk. The soul is"who benefit, who bear". The amount of capital, taken on by each department, sub-bank or operation, should equal the risk it holds. The fourth part analyzes the puzzles we are encountering about management on capital at risk. The last part brings out the principles and methods of capital management. |
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