Empirical Study On Credit Risk Management Of Commercial Banks Based On Amended KMV Model

With the announcement of the annual reports of commercial banks in 2018,it can be seen that under the pressure of economic downturn,there are significant differences in the asset quality and growth rate of large and medium-sized commercial banks,such as the non-performing loan balance of local city commercial banks,large amount and poor asset quality.Bank of China also mentioned that in the Economic and Financial Outlook for the Third Quarter of 2018,the global banking risks will rise.For the Chinese banking,it is necessary to pay close attention to the pressure on increasing credit risk.A series of strong regulatory policies on de-leveraging by the China Insurance Regulatory Commission has reduced the growth of bank financial business,inter-bank business and channel business.Therefore the repayment pressure of enterprises that rely on these channels to apply for financial support has been significantly increased thus exacerbating Cross-infection of credit risk.These data and reports can be seen that the proportion of Chinese commercial banks negative loans is very big,and the accompany credit risks cannot be ignored.Therefore,it is a key to strengthen the management of credit risk in the process for Chinese commercial banks.To strengthen the management of credit risk of commercial banks,firstly we should choose the right model to measure credit risk.On the basis of this prerequisite we can work with a specific target and make appropriate prevention and control measures on risk to ensure the banks sustainable development.It is a long history about research on the measurement methods of credit risk.Most of the early credit risk measurement methods are qualitative analysis such as expert system method,credit rating method and credit scoring method.With the development of financial theory and the deepening of research results,the modern risk measurement is more quantitative analysis and its reality and feasibility are better than the traditional credit risk measurement.The modern credit risk measurement model is mainly divided into four types and each of which has its own advantages and disadvantages and the applicability of the model is variable.The Credit Risk+ model is applicable to multiple independent medium-sized and small debt processing problems.The Credit Metrics model is applicable to companies with a well-established internal and external credit rating system and a large amount of historical data which can establish a credit rating transfer matrix.CPV model is applicable to companies that closely linked to credit risk and national macroeconomic changes so this model requires cross-industry macro data and historical data that relevant to credits.The KMV model is based on dynamic securities market data.The model theory is strong and efficient and it doesn't require the premise of effective market hypothesis so it is suitable for measuring the credit risk of Chinese commercial banks.In the empirical research of KMV model,13 listed commercial banks are selected as samples.The empirical process includes the calculation of samples income volatility,equity market value and its volatility asset value and its volatility and calculations of default points.The default probability is figured out bay default point and the accuracy of the analysis result is compared with the rating results of the existing rating companies on the sample bank.Next the stock transaction data and financial data of 28 ST companies and 28 non-ST companies which were sampled by random sampling in this process,the value of the best default point was determined by the method of paired two-sample analysis and finally the value of a is 0.85.After calculating the default distance in the amended KMV model,panel data is used to analyze the factors that affect the credit risk of commercial banks.We will select the eight explanatory variables to research include total assets,asset-liability ratio,loan-to-deposit ratio,loan ratio of real estate enterprises,operating profit ratio,business prosperity index,the increment of total Sino-US trade andinterest rate liberalization.The empirical results show that the credit risk of commercial banks is positively correlated with the total assets and operating profit margin of banks,negatively correlated with the loan ratio and loan-deposit ratio of real estate enterprises positively correlated with the business prosperity index and the increment of total Sino-US trade and has a certain degree of influence on the process of interest rate liberalization.We can concluded that,we should speed up the improvement of credit risk rating system innovate scientific and technological means so as to improve the efficiency and risk control of financial services.At the same time,we should pay close attention to the development of real estate enterprises and rationally allocate assets structure and strictly control the loan-deposit ratio.In addition to this project,commercial banks should also timely grasp the development of macroeconomic situation at home and abroad.Meanwhile,commercial banks should be alert to the impact of changes in the economic cycle and pay attention to the impact of Sino-US trade frictions.Moreover,we should do a good job of risk isolation measures to prevent the occurrence and infection of cross-sectoral risks.