Day Rishengchang Commercial Bank Credit Risk Management System

This paper takes the risk management requirements in Basel II as the guiding principle and it makes an in-depth gap analysis on credit risk management of RISHENGCHANG commercial banks. It put forward the thinking on establishing the credit risk management system in RISHENGCHANG commercial banks.Firstly, this paper makes the analysis and conclusion on the Basel II and internal rating-based approach (IRB approach). It introduces the three pillars of minimum capital requirement, supervisory review process and market discipline. This paper explains the IRB approach to calculate the credit risk capital requirement and makes the analysis on the progress brought by the Basel II and its impact on the banking sector.Then, it makes the gap analysis between the RISHENGCHANG commercial banks and the international advanced commercial banks on the aspects of internal rating system, credit risk culture and human resources if implementing IRB approach in domestic commercial banks .Based on the gap analysis, it put forward the idea of setting up the two-dimensional rating system of obligor rating and facility rating to quantify the credit risk based on the current data and the reality faced by RISHENGCHANG commercial banks.At last, it introduces the application of the IRB results on economic capital, credit limit, loan pricing and performance measurement taking the PD, LGD as the premises. The innovation of the risk management by Basel II will make RISHENGCHANG commercial banks transfer the loan decision-making process from the traditional subjective judgment and unreasoning pursuing the size and short-term profit to the scientific decision-making process.