Comprehensive Risk Management. On The Banks Of The Core Methods Of Raroc,

RAROC (Risk Adjusted Return on Capital) system is the core way ofEnterprise-Wide Management, which is core method used by international banks inbusiness management. RAROC system turn future expected losses caused by risk intocurrently cost. The denominator of the RAROC equation measures the capitalrequired to absorb the unexpected loss. RAROC makes revenue related with riskdirectly through measuring risk-adjusted return on capital. RAROC system supplies astandard criterion for business decisions, development strategy, risk management andperformance evaluation in all level of bank.The thesis analyses the development process of risk management in westerncountries and analyses the reasons of Enterprise-Wide Management booming inrecent years. I introduced how to calculate economic capital and how to measuremarket risk, operational risk and credit risk. RAROC system has important role in riskmanagement and capital assignment in banks. The thesis analyzed the conditions ofloan pricing, economic capital assignment and performance evaluation in westernbanks.Because risk management in china's commercial banks is just beginning and facelots of difficulty, china's commercial banks should face fierce competition and takeresponse measures to challenge it. This thesis researched credit risk, operational riskand market risk faced by china's commercial banks. China commercial banks alsohave deficiency in risk management system, risk culture, information systems andmeasuring technology, and so on. At last, I suggested how to implement RAROCsystem in china commercial banks.