Survival Analysis Based Research On Risk Warnin Of Commercial Banks In Mainland China

Control of financial risk has becoming one of the most serious problem that every nation has to consider as the exchanges of economy trading and development of technology gathering more and more closely due to the global economics in the late20th century. Commercial banks are essentially institutions that manage risks. Whether it can withstand the rigors of the compact has becoming a hotspot in the field especially confronted with the financial transition. Basel â…¡ has been deployed in process to the commercial banks in Mainland China, which claims for the fundamental requirements that commercial banks should obtain higher level of the ability to manage risks.First, this article constructs early-warning index systems by selecting indexes that are widely accepted from four categories of risks, which are credit risk, operation risk, liquidity risk and capital risk according to its pattern of manifestation. Then collect data from annual report of chosen commercial banks between2007and2011, reduce the dimension of data using approach of multi-dimensional statistic method such as principal component analysis and step regression. After that, franchise value, which is the judgment of living status and living time, of each bank during2007to2011is computed via profit before tax method, with which threshold is defined along with living status and time for each bank during each year. Consequently, survival-function model of each bank is obtained using survival analysis based on Cox regression. In the end, the survival rate of selected banks in2012along with franchise value is predicted using GM(1,1) modal and survival function.The consequences show the consistency between charter value and probability in discussing whether a bank bears the risks or not. But speak of degree of distinction, survival probability is much reliable. Thus this method can be used into practical situations to result in a more accurate conclusion.This article applied the wildly used survival analysis model into the field of economy to test the risk, and obtain a more discriminate result than the charter value. A new method has been introduced to warn the risk for commercial banks and it is believed to be flexible for enhancement in the future.