The Research Of Trading Bookmarket Risk Internal Model Approach (IMA) Of P Bank

With the innovation of financial market products and the pact towards interest rate liberation in China, the banking industry is facing increasing market risk exposure. The China Banking Regulatory Commission(CBRC) adopts the new Capital Accord of the Basel Committee(Basel III) to establish and promulgate the "Capital Rules for Commercial Banks(Provisional)." According to the "the Rules", commercial banks can apply to use Internal Model Approach(IMA) for market risk and capital measurement. P Bank is a typical jointstock commercial bank, the core content of the paper is an in-depth study of the use of Internal Model Approach in P's trading book.The first section of this paper explains in details on the implementation requirements of the Internal Model Approach in New Basel Capital Accord and the CBRC "the Rules", specifying the qualitative and quantitative standards.The second section of this paper describes P Bank's background and its expansion in financial market services. This section also analyzes P Bank's current market risk status, including the division between trading and banking books, main financial products, risk factor system and so on.The third section is the main section of this paper, detailing P Bank's current trading book market risk management status after its implementation of IMA, covering all risk management modules under this approach. In China, the implementation of IMA is well ahead of most of the Chinese banks. Though we are only going to describe the current situation of P Bank's IMA implementation, reviewing its experience is of crucial importance and especially valuable for other Chinese commercial banks.The last section is the core of this paper. There are still many areas that P Bank needs to improve on to reach global leading practices base on the analysis of its IMA implementation. This section focuses on P bank's deficiencies and the author has proposed appropriate solutions based on his work experience and expertise.