Title: Integrated risk study for Chinese commercial banks with fuzzy comprehensive appraisal method

Authors: Hongmei Li; Haigang Zhou

Addresses: School of Mathematics, Liaoning University, Shenyang 110036, China ' Department of Finance, Cleveland State University, OH 44115-2214, USA

Abstract: The Basel Capital Accord II proposes that commercial banks should supervise not only credit risk but also market risk, liquidity risk and operational risk. Using the fuzzy comprehensive appraisal method based on the Basel Capital Accord II, this paper measures the integrated risk of Chinese commercial banks. Our results indicate that the average values of the four types of risks are higher than the integrated risk of the four risks, indicating an overestimated whole risk. Our results illustrate the importance of considering the correlation between the different risk sources in order to efficiently allocate financial resources.

Keywords: integrated risks; commercial banks; fuzzy comprehensive appraisal; R-cluster analysis; principal component analysis; PCA; China; banking industry; credit risk; market risk; liquidity risk; operational risk.

DOI: 10.1504/IJFSM.2013.059608

International Journal of Financial Services Management, 2013 Vol.6 No.4, pp.334 - 351

Received: 14 Oct 2013
Accepted: 06 Jan 2014

Published online: 02 Mar 2014 *

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