A Research On Credit Risk Measurement Of Chinese Commercial Banks

This paper focuses on how Chinese commercial banks improve credit risk management to meet the requirement of IRB based on The Basel protocol. We use the method of combining quanlitative analysis and quantitative analysis, and comparative analysis to make a theoretical analysis and empirical analysis on the credit risk measurement model.In the first introduction part, this paper introduces the research status of credit risk management at home and abroad. Then in the second part, the definition and characteristics of credit risk are introduced, and the connotation of credit risk management and the content of Basel protocol are emphasized. We emphatically introduce the current situation of the credit risk management in the field of Chinese commercial bank. The third part briefly introduces the contents of the IRB and four kinds of modern credit risk measurement model. We analyze the applicability of the four modern measurement models in the credit risk management area, and draw the conclusion that KMV model is the most suitable one. On the basis of the current situation analysis, the fourth part focuses on how to modify the KMV model. There are two parts of this empirical study. The first part is the cross section analysis, that is to test whether the improved KMV model can effectively distinguish the ST and non ST companies, and what kind of default point to set can make the model more effective. The second part is the longitudinal time series analysis, that is to test whether the improved KMV model can better predict the change of the credit risk of a company. According to the empirical study of a sample of 40 listed companies in Shanghai and Shenzhen Stock Exchange, we draw a satisfactory conclusion that the modified KMV model can be used to measure the listed company’s credit risk quite well. At last, this paper puts forward some suggestions on how to improve the credit risk management of Chinese commercial banks.