These risk factors mainly include: probability of default (PD), which refers to the probability that the debtor violates the loan regulations and cannot repay the principal and interest on time; Loss on Default (LGD) refers to the loss caused to the bank by the debtor's failure to repay the principal and interest on time, which is manifested as the average loss of unit debt; The value at risk of default (EAD) refers to the estimation of risks faced by banks when counterparties default. Term (M) refers to the effective contract term of the transaction that the bank can provide to the regulatory agency.

Credit risk management refers to the management of risks arising from the "possible" default of counterparties, borrowers or bond issuance. This risk component can be divided into "default probability", "recovery rate after default" and "principal".

Credit risk management is the biggest topic in the financial industry. In addition to the credit risk management of "loan position", it is also necessary to manage the credit risk of "counterparty" or "securities issuer" that it invests in.

Classification of credit management:

According to different lenders, credit risk can be divided into national risk, industry risk and personal risk.

According to the causes of credit risk, credit risk can be divided into moral credit risk and immoral credit risk.

According to the controllable degree of source credit risk, credit risk can be divided into controllable risk and uncontrollable credit risk.