A Brief Introduction to the Quantitative Models of Risk Management in China's Commercial Banks

摘要

The global financial crisis caused by the U.S. real estate market has imposed great impacts on the U.S. commercial banks and has brought up good alerts to the governance to China's banking industry. The financial exposures faced by the commercial banks increases with the opening up of China's financial market. The essence of competition among the commercial banks in future is the competition of the quality of risk management. It is an acute problem waiting for resolution by China's commercial banks as how to prevent and control the birth of new financial risks, and alleviate the potential financial risks. It is the current status of the risk management of China's commercial banks that there are more qualitative than quantitative governance; more expost response than ex-ante prevention. Considering this, this article introduces two models that can be used to give the pre-warnings of the banks' risks quantitatively: the main factor analysis model and VAR model. The article demonstrates the mechanism of their quantitative evaluation, and gives an example to explain the applicability of the VAR model. This may offer valuable proposals to improve the governance of China's commercial banks.