Game Study On Credit Risk Manangement Of Commercial Banks Based On KMV Model

Commercial banks are the main media of financial transactions, which decide whether thewhole national economy can run smoothly. At present, Chinese commercial banks are still inthe stage of transition and emerging development, and have accumulated a large amount ofcredit risk. In recent years, Chinese commercial banks have taken various measures to makenon-performing loan ratio decreasing. But since2009, the scale of commercial bank loans israpidly expanding, and loss preparation is deficiency, so credit risk is still one of its main risks.Thereby improving the credit risk management level of commercial banks is an importantfacing issue of the banking industry.On the basis of previous studies, according to the2005-2010banking data, the paperfirstly analyzes the current credit risk situation of Chinese commercial banks by the use ofvertical comparison method. Secondly establishes the game equation on credit riskmanagement of commercial banks respectively by the signal game and repeated game method,and qualitatively analyzes the adverse selection behavior of an enterprise before signing acontract and the moral hazard behavior after signing a contract, which takes credit risk to thebank. Thirdly based on the stock and financial data of25listed companies in Suzhou,performs the KMV model to quantitatively predict one of the key elements in the gameequation: the expected default frequencies of companies. Finally forward some targetedsuggestions.Through the paper study, it is showing that due to the rapid expansion of the loans’ scale,the over-centralized of loan distribution industry and the decline of capital adequacy ratio, thecredit risk of commercial banks is high. By the use of game models to gain the specific factors that impact the level of credit risk management: cover costs of the business operation report,the expected default frequencies of companies, and the expected gene on the next tradingpossibility of the game both sides (banks and enterprises).Based on the above findings, thispaper put forward a series of measures to improve credit risk management level of commercialbanks from the following three aspects: to perfect the internal credit risk management systemof the banks, to enhance the internal credit establishment and maintenance mechanisms of theenterprises, and improve the external supervision efficiency of regulatory authority.