Investigation Of Bank Credit Risk In Transferring Period Of China

Market economy is credit economy and credit risk is then the oldest kind of risk in financial market. For the commercial banks which regard credit as the target of managing, credit risk is their inherent and main risk faced even more. Credit risk is also called the default risk, it can be defined that a kind of possibility which suffers the bank, investor or the other side of trade from lost, because debtor, securities publisher or the other side of trade are unwilling or unable to fulfill the terms of the contract and form breaking a contract because of various reasons. In the commercial bank, it is reflected mainly on traditional loan, discounting, overdrawing, letter of credit, the same trade dismantling and putting, guarantee, securities underwriting and so on.China is in the transferring period of melting into the Global Economic Integration, Global Financial Integration, economic reforming from the Planned Economy to the Market Economy and faced with the contradiction of balancing between opening the market and maintenance of financial stableness. A series of changes, such as the state-owned banking system, the financial system, the government intervention etc, have had tremendous influence to the bank credit risk management. Under the new form that the financial globalizes, commercial banks of our country must use the advanced management experience of credit risk in the world as reference, strengthen management of credit risk, develop suitable management model of credit risk, and meet the need of the new frame of . Therefore, what strengthens the research of risk measurement model of commercial bank of our country, and narrows the disparity foreign counterpart, has already become the great subject that financial circles of our country has faced.The test intends to select the best credit risk assessment model for the transferring period of China via the introduction and analysis of bank credit risk in China transferring period and the comparison reach of modern credit risk assessment model. Besides, the test aims to make the analysis by bringing our country data to the improvement of the model. Then, according to the result which obtained, judges the model the usability as well as the appraisal company credit condition.The measurement model of credit risk can roughly be marked as Classical Methods and Modern Methods. For the Classical Methods, the text introduced the Expert methods, Internal Rating Systems and Altman Z Model. These all Classical Methods are only the kind of ordinal classification, but certainly can not point out the risk size. While, since 1990s, several west commercial banks have begun to explore to use modern financial theory, mathematics tool to assess credit risk, and have set up the Modern Model based on risk value, probability in default, expectancy loss, for example Credit Metrics, KMV, Credit Risk+, Credit Portfolio View model, etc. Through the comparison of these four modern models, especially based on the transferring period situation, the test selected KMV model to carry out the credit risk assessment with the Chinese listed company for the real diagnosis analysis.KMV model is a kind of method to calculate credit risk that the KMV Company introduced. This model bases on the model that Merton was put forward in 1974 to derives the real default frequency of each debtor's according to--Expected Default Frequency, namely default frequency is the function in such variables as company's capital structure, fluctuating rate of the assets income, assets current value, etc., therefore KMV model mainly utilizes the option price theory to set up the controlling model, and to predict the credit risk of the listed company.There are concretely including four steps to estimate credit risk of listed company with KMV model:(1) To estimate the Company's assets market value VA and the fluctuation rate of company's assets valueσA;(2) To calculate Distance-to-Default, it is index estimate of the default risk;(3) To use default database to set up corresponding relation between Distance-to-Default and real default frequency;(4) To estimate expectancy default loss and anticipated default loss of loan.In this article, we mainly carried on the credit analysis of credit against three representative listed companies: GuizhouMaotai600519, Shanghai Medicament600849 and ST-Yinguangxia000557. They distinguish represent fine achievement, the medium achievement and the worse achievement listed company. By the analysis using KMV model, we get their Distance to Default i.e. DD, it can be used to judge the quality of company's credit state. To a certain extent, the size of Distance-to-Default reflects the true credit state of listed company. The market value of company's assets which be calculated with KMV model is greater than company's total assets and company's total market value. And generally speaking, if the company's total market value is higher, the company's assets market value is higher. While using KMV model to calculate the Distance-to-Default, we used traded data on the stock market of listed company. The comprehensive information in many aspects therefore can reflect company's credit state in an all-around way better. We can often update Distance-to-Default of listed company and offer the credit state index that relatively accords with company's actual conditions for bank in time. However, because our nation is in the transferring period of both economy and society, there is certain discrepancy between the model supposition and reality. More, the data quantity and quality influenced the application of KMV model in our country. Though the result of KMV model is not obvious between fine achievement company and medium achievement company, the KMV model is somehow a kind of effective credit risk assessing model which suited Chinese listed company in the transferring period of China.