An Empirical Study On The Credit Risk Management Of Commercial Banks

In recent years, under the new situation of financial globalization, the credit risk has become one of the most important risks which banks are confronted with. The ability to control and manage the credit risk is related with the stability of the bank system and the development of the national economy. With the development of econometrics and computer technology, the credit risk management is changing from traditional qualitative analysis to quantitative analysis and many major financial organizations have introduced various credit risk management models in order to improve the ability of controlling and forecasting the credit risk. In China, commercial banks are still using the traditional ways, and have just started to use the modern models to analyze the credit risk. In this paper, I use CreditRisk+ model, which is based on insurance actuarial theory, to do an empirical study on the credit risk management of commercial banks.First of all, this paper reviews the development of the credit risk management. After comparing the four major credit risk models, it concludes that the CreditRisk+ model shows advantages. Then according to the CreditRisk+ framework, this paper calculates the loss distribution of loan portfolio. Finally, I use CreditRisk+ to analyze the credit risk of one branch of a bank.The result shows that the credit risk of commercial banks obeys skewed-distribution, with a fat-tail. At present, for the sample bank, the regional difference of loss distribution of the credit risk is obvious. Among the 10 cities in Zhejiang province, excluding Ningbo, Hangzhou & Shaoxing both have high values of credit risk VaR, but a low ratio of VaR to Loans Outstanding, while, the result is quite the reverse in Lishui. In the end, this paper suggests the commercial banks build a financing system based on the principle of credit risk diversification, transfer and compensation. Therefore, the bank can adjust the industrial structures of its credit portfolio, through the regionally financial market, so as to reduce the credit risk on the whole.The innovations of this paper lie in two aspects. One is that after deeply...