Study On Stress Testing Of Commercial Banks

The U.S. "sub-prime mortgage crisis" caused by the global financial turmoil, such as Merrill Lynch, Lehman Brothers, and many other well-known financial institutions have closed down, but also forced the world’s largest automotive companies General Motors bankruptcy reorganization, according to the Bank of England estimates global financial institutions losses amounting to 2.8 trillion U.S. dollars. The financial crisis is not only so that investors suffered huge losses, but also to the entire financial market upheaval, the global financial environment continues to deteriorate. Is well known that the stability of financial markets to a large extent depends on commercial banks and the stability and robustness, while the banks of the stability and soundness of banks in turn depends on risk and risk-resistance capability. Should be for such extreme deterioration of the macroeconomic environment scenarios, the risk of the original test method, mainly refers to the value at risk (VaR), risk status can not be properly measured and predicted, while the stress test method is in this proposed against the background.China’s commercial banks because of the risk management level and the international advanced level there is a certain gap, and are subject to a number of software, such as management structures and hardware such as databases were incomplete, the limitations, this paper argues the need to build a set of characteristics of China’s commercial banks in line with the effective pressure test system, but also must be fully taken into account the current stress test the system deficiencies and shortcomings.In this paper, stress testing of the theoretical background and practical background to proceed, including the theoretical background at home and abroad over the years mainly for stress-testing the theory and method are summarized, and the background of the current financial crisis, to explain the importance of stress testing, while currently in in this area of research methods and comparative analysis to summarize the use of the above theories and methods to build effective pressure on the current testing framework to explore several issues, identify the current major issues and propose appropriate solutions, and thus on how to build an effective stress test frame system are expounded. Then the article will use the real commercial bank real estate loan data for empirical analysis and empirical research, using statistical and econometric methods to identify the risk of such loans, the key factor, as well as the risk tolerance of such loans. The end for the current China’s commercial banks to build an effective system of stress tests to make a suggestion to help China’s commercial banks to improve their quantitative risk management, promoting stress testing work in the implementation of the relevant departments.Paper’s contribution lies in:First, although the current research on the stress-testing theory and methods are more books and literature, but it really take into account the actual situation of China’s commercial banks, the study is relatively small, while the actual data from the environment and business in the context of the discussion in line with the characteristics of the pressure test systems are even scarcer.Second, the current method of showing stress-testing to achieve diversity, but at present these research methods, many methods are not well targeted financial data to model the distribution of specific data and estimates, while taking into account the risk of multiple risk factors between the hedging mechanism and mechanism of induced fewer.