The Measurement Of Default Rate Of Listed Companies And Potential Credit Risk In Chinese Commercial Bank

Credit risk plays an significantly important role in Chinese Commercial Bank among a large number of risks, credit risk was produced during the period of the bank’s business operation. It also leads to the potential losses of the bank, so we should value the credit risk of Chinese Commercial Bank.In this paper, there’s an introduction of the characteristics and the broad and narrow meanings of credit risks in Chinese Commercial Bank. High bad loan ratio, single financing channel and too much interference of the government were discussed respectively. Then the study on the reasons which led to credit risks in Chinese Commercial Bank were stated from both the internal and external point of view. And then, there is an introduction of several traditional risk measurement methods and four credit risk measurement models, then there’s an analysis of the applicability of four credit risk measurement methods, finally came out the conclusion that KMV model is comparatively more suitable to measure the credit risk of Chinese Commercial Bank. There’s an empirical analysis of fifty listed companies which were selected as the object based on KMV model. The “Distance to Default” and the prospective Probability of Default were worked out through statistic analysis of some financial data of 25 ST companies and 25 other companies. To sum up, KMV model can reflects the credit risk of companies with different assets and business status, it can also tell the credit risks level according to the “Distance-to-Default” and Probability of Default clearly. At last, there are some suggestions to solve the problems in credit risk management of Chinese Commercial Bank.