The Measurement and Control of Credit Risk in the Chinese Banking Sector and the Application of CreditMetrics Model

Guo, Xiaofei (2006) The Measurement and Control of Credit Risk in the Chinese Banking Sector and the Application of CreditMetrics Model. [Dissertation (University of Nottingham only)] (Unpublished)

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Abstract

Financial globalization, increased volatility of financial markets and rapid developments in financial engineering has dramatically increased the risks of a bank's trading position. Of the major risks involved in banking management, credit risk is regarded as the major risk in terms of its influence on bank performance and bank failure.

Credit risk can be most simply defined as the potential that a bank borrower or counterparty fail to meet its obligations in accordance with agreed terms. Effective management of credit risk is a critical component of a comprehensive approach to risk management and essential to the long-term success of any banking organisation.

In China, credit risk is the most significant financial risk that banks may face in its business operation and the exposure to credit risk is constantly perceived the leading source of financial losses. The problem of non-performing loan (NPL) in China's banking industry is one of the most urgent matters to be dealt with by market participants and regulators. PriceWaterHouseCoopers (China Daily 2006a) revealed that the NPL market in China is the largest in the world. The China's central bank stated that NPLs for the four large state-owned commercial banks totalled 358 billion dollars (China Daily 2006b).

The dissertation provides a framework for effective management of credit risk in Chinese banks. The research reviews the current practices of credit risk management of the Bank of China, and it applies the CreditMetrics model in one of their credit portfolios with the aim of establishing a sound credit risk measurement and control system in Chinese banks.

Item Type: Dissertation (University of Nottingham only)
Keywords: Credit risk management, credit risk modelling, CreditMetrics model
Depositing User: EP, Services
Date Deposited: 20 Dec 2006
Last Modified: 27 Sep 2016 20:53
URI: http://eprints.nottingham.ac.uk/id/eprint/20474

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