Study On The Management Of Commercial Banks Base On RAROC

A great changes has taken in the field of bank management in past 20 years. The key point began transmit from assets liabilities management to capitals management of risks estimates.With the development of management,the competition among the international banks exposed in the areas of risk estimates,risk management,economic capitals delivery and performance measurement.RAROC is the main way,applied by the western advanced commercial banks.RAROC system turn future expected losses caused by risk into currently cost. The denominator of the RAROC equation measures the capital required to absorb the unexpected loss. RAROC makes revenue related with risk directly through measuring risk-adjusted return on capital. RAROC system supplies a standard criterion for business decisions, development strategy, risk management and performance evaluation in all level of bank.While domestic research in this field is just at the beginning, the related researches, which are mainly focused on the translation and introduction of overseas research results, are mostly fragmentary introductions and lack systemic research.This thesis is developed under the above background. It makes an explanation of economic capital firstly, and then gives a comprehensive introduction to RAROC based on the current situation of Chinese banking capital management. When using RAROC to measure the performance of bank's business units, we found that it lack accurate scale of capital allocation in operation, though it can be used as foundation and basis of bank EC allocation in theory. To settle this problem, this paper put forword five constructive suqqestions to help our domesdic banks use the RAROC based on the experience of advanced foreign banks.When studying the theory circumstance of RAROC, this paper found the standard of Economic Capital allocation based on RAROC also has some limitations. It mainly displays in the risk quantity completeness difference reflected in two main variables HR (Hurdle ratio) and RAROC (risk adjusted return on capital), which caused the capital allocation trap. Founded on the overseas research results, this paper has carried on the revision to the traditional RAROC.