| Summary: | 碩士 === 元智大學 === 管理研究所 === 94 === This study discusses the practice of Basel II on loans of corporate banking based on the example of different influences on Bank A and Bank B, a bank under Financial holdings.A bank may re-allocate its loan portfolio in order to maintain its capital adequacy ratio, profitability, and market competibility. This study obtains the following main conclusions:
1.Bank A cannot use the Internal Ratings-Based Approach (IRB) on credit risk for lack of enough data base of past information, risk management human resources, and information technologies. Therefore, Bank A can only use the Standardised Approach on calculating its capital requirements for credit risk. As a result, Bank A will suffer high capital cost so weaken its competibility.
2.No matter Bank A use IRB or Standardised Approach, Bank A’s loans with high proportion of land and construction lending, which is a common situation as most of the other banks, resulted in high risk weights. Bank A should rearrange its loan portfolio so that to maintain its capital adequacy ratio and market competibility.
3.Bank B, a bank under financial holdings, is active on risk management. Bank B established Risk Management Department and other risk management teams. If Bank B can use the IRB on credit risk, that will strengthen its effectiveness in capital allocation and competibility. However, risk management department is not a guarantee that Bank B can use the IRB. Bank B should also make the effort with other departments, such as Loan Assessment Department, Credit Review and Management Department, Personal Banking Department, Corporate Banking Department, Information Technology and Administration Department, and Accounting Department.
4.Banks in Taiwan should evaluate its situation to decide the use of IRB or Standardised Approach on credit risk. They should not await for the authority in charge to choose the approach for them. The methods and steps discussed in this study may help those banks which has similar situation to Bank A or Bank B.
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