Internal Models and Regulatory Models -- Risk Measurement and Capital Allocation

Author: Zhao Xianxin
Publisher:
Publish Date: 2004-06-01
Features: This book can help state-owned banks and national banks establish a true risk culture, which is also the main motivation behind the author's writing of this book. Due to systemic reasons, the management of state-owned banks is not risk-oriented at present. For example, the risk buffer mechanism adopted by state-owned banks is a fiscal mechanism rather than a true private capital mechanism. The confidence of depositors and the market in banks depends on government credit and fiscal support; the management orientation of state-owned banks is not shareholder value maximization but government objectives (the predecessor of state-owned banks was national specialized banks, from the perspective of risk management, this is contrary to the principle of portfolio diversification, but it helps promote the government's economic development plans); in determining credit plans, state-owned banks do not decide risk-taking based on capital budgets but determine credit volume based on the central bank's monetary control plan; the corporate governance of state-owned banks does not follow a vertical path along business lines but implements hierarchical accounting and hierarchical management. Under the environment of inadequate incentives in state-owned banks, fiscal federalization (fiscalfederalization), and localization of staff interests, hierarchical accounting and hierarchical management system has been proven to be a major root causing moral hazard and further forming insider control.