Study On Credit Risk Management Of Commercial Bank Of China

Finance is the core of modern economy and banking is a very important part of finance. A steady and well-running financial system is essential to a healthy economy. Business activities of commercial banks are full of risks which mainly are credit risk, market risk, liquidity risk and operational risk. Credit risk, among them, is the most ancient and most important one.The global financial crisis triggered by U.S. subprime mortgage crisis in 2007 makes people aware that risk management, especially credit risk management, is not a dispensable luxury, but a necessity which promotes steady growth of financial institutions. After the crisis, commercial banks around the world strengthen and improve risk management system, particularly credit risk management, which is the international background of the study. Meanwhile in our country, an appropriate monetary policy and counter-cyclical credit policy are implemented, in order to struggle against the crisis. The counter-cyclical credit policy helps to promote economic recovery, but the massive bank lending also means higher credit risk, which leads to a surge on non-performing loans and higher non-performing loan ratio, also makes credit risk prominent. Meanwhile, the hidden danger of local financing risk and risk of real estate loans are gradually exposed. In addition, our country's commercial banks haven't established model risk measure models which suit their own characteristics. Hence, it is necessary to perform in-deep study on credit management related issues, including using quantitative management tools, of our country's commercial banks.The thesis consists of six chapters. The first chapter gives a brief introduction to the background on the theme, the significance of the study, also the latest international and domestic research progress. The second chapter sketches credit risk and credit risk management, including the requirements of credit risk measurement proposed by the New Basel Capital Accord, which are pre-requisite to Well-know credit risk management and credit risk measurement. Chapter 3 analyzes the state of the art situation of risk management, furthermore points out the challenges standing in front. Chapter 4 shows an empirical analysis of measurement of credit risk management of our country's commercial banks. A comparison is performed between varieties of credit risk measuring models which comes to the conclusion that KMV model is most suitable for our country's present situation. Then an empirical analysis is implemented to confirm and testify the conclusion. Chapter 5 proposes suggestions and proposals to commercial bank credit risk management, according to the problems found and challenges facing. Based on the analysis result in chapter 4, suggest that we build a credit risk measuring model which fit our country's situation by learning from the principles and contents of KMV model, thereby raising the level of the credit risk management of our country's commercial banks and improve core competency. The last chapter is the concluding of this paper.