A Study On Business Bank's Allocation Management Of Economic Capital

The allocation management of economic capital (EC), in recent years, has become the introduced concernful management theory which domestic commercial banks are exploring and developing. China's banks were frequently affected by administrative interventions in a long period, which led to the senses of capital management weakened. With the all-around open of financial industry to foreign-funded banks after entering the WTO, China's banks gradually make aware that the capital resource which is scarce and for complementing non-expected losses should be reasonably and scientifically allocated.Firstly, the paper detailedly described the concepts of EC's management, analyzed the EC's allocation management method, referred to its significances for banks'operation and management, special for improvement of capital structure, and introduced the practical application of RAROC and EVA indicators on EC's management.Secondly, the paper attempted to introduce the mathematic method of non-linear programming, described the principle of method and how to apply it to the EC's allocation management, especially the EC's allocation, and also designed the processes of computation and thoughts.Thirdly, the paper stated the allocation EC's management system of Bank of China (BOC), clearly described BOC's the methods, means, management range and indictors of EC's allocation management and measure method of EC. The paper also simply analyzed the existed problems in its'sub-branchesFinally, the paper took an empirical research on BOC's branch by the method of non-linear programming with 2005 and2006's financial data, and analyzed whether this method can effectively direct the sub-branches to improve the capital structure and contribute the maximum of its economic value.