| Credit risk is the key problem for commercial banks' management.The credit risk from counter-party banks will be more extensive because of the increasing volume of interbank transactions including money market trading, bank accepted draft discounting, FX trading, bond investment and varied derivative transactions.This influence can be reflected both from the bank crisis cases in history and from the sub-prime loan crisis that is still damaging many banks survival today.In this regard, it is critical necessary to build a scientific credit risk scoring card model for counter-party banks.Given that most oversea counter-party banks are already rated by external rating agencies, the paper will focus on the model for domestic counter-party banks. The model is required to satisfy the IRB approach, to effectively identify and measure the credit risk and to extensively cover a full range of quantitative and qualitative factors.The major study points of the paper are illustrated below:On the one hand, The paper found that the method of experts analysis are restricted by pitfalls including high cost, low efficiency, unstable results and lack of response to changes. Furthermore, it also found that the modern quantitative models are not applicable to China's domestic banks because of its restricted assumptions, inability to reflect the moral risk and lack of studying samples and historic data.On the other hand, the paper tried to build a scoring card model to measure the domestic counter-party banks credit risk. The paper chose M bank as the study case and build the model based on the risk faced by M bank,the historic data provided by M bank and other factors required by the New Basel Accord that will be applied in M bank before 2010.In consequence, we should realize that China's banks are still in the starting state to introduce and apply the credit risk model.It is necessary for us to improve the model to modify its pitfalls. |
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