Research On Economic Capital Management Of Local Corporate Banks In NingXia

Economic capital management is a main tool for optimize resource allocation and implement enterprise-wide risk management which is widely used in modern banking financial institutions. Using economic capital can quantify risk level that produced by overall bank activities, calculate the amount of capital that the bank need to resist risks, help the leadership to adjust risk tolerance and development strategy, make a more scientific, rational, and distinct policy combination, and make sure the bank maximize its profit.This paper states the management, allocation and measurement of economic capital, and then base on the standardized approach, calculates the amount of economic capital that the two banks (local legal person bank, and both of them are in Ningxia province) need to cover their credit risk, market risk and operational risk, at the same time, analyze the operation and risk management of those two banks by EVA and RORAC index.The outcome shows that the economic capital management of Ningxia’s local legal person bank is at initial stage, which means the value of capital have not get into full play, the method of risk management tends to be passive, and the increase of its profits mainly rely on the simple expansion of business scale.