The recovery rate is the ratio of the maximum recovery amount actually received by the creditor to the maximum expected recovery amount after the debtor defaults. This method is more convenient in accounting treatment, but after 2008, the voice of pre-extraction preparation to prevent financial risks is getting higher and higher.
Customer risk early warning system In the credit risk management of commercial banks, the probability of default refers to the possibility that borrowers will not be able to repay the principal and interest of bank loans or fulfill related obligations in a certain period of time in the future. Default probability is the basis of calculating expected loan losses, loan pricing and credit portfolio management, so how to calculate default probability accurately and effectively is very important for credit risk management of commercial banks.
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For the credit risk management of commercial banks, the measurement of default probability occupies a basic position and plays an important role.
First of all, this is the first condition of credit risk management. As a basic method to measure credit risk, credit rating plays a role based on the measurement of the borrower's default probability. Only by scientifically calculating the default probability of borrowers can banks accurately calculate the expected losses, objectively and accurately evaluate the credit status of customers, and then ensure the scientific and effective credit risk management of commercial banks.
Secondly, this is an objective standard to measure the advantages and disadvantages of different rating systems. If there is no measure of default probability, it is difficult to measure the advantages and disadvantages of different rating systems; If we avoid the rigorous and scientific measurement of default probability and only pursue the construction of rating index system and the improvement of rating method, we can't realize the modernization leap of credit rating. The measurement of default probability is the soul of the authority and operability of credit rating, and it is an objective standard to measure the advantages and disadvantages of different rating systems.
Third, this is an important driving force to improve the quality of risk management of commercial banks. Practical experience shows that the successful measurement of customer default probability depends not only on the scientific application of advanced statistical models and risk quantification tools, but also on the in-depth understanding and scientific grasp of modern commercial bank management rules, which need to be adapted in management concepts, systems and mechanisms, so as to effectively improve the quality of risk management of commercial banks.