【文章內(nèi)容簡介】 of managing credit risks Credit Risk Distinguishing credit risks is the basis of risk we can’t recognize the risks,we are unable to find appropriate solutions to manage example,the United States subprime crisis in 2007 was partly caused by that the financial institutions and regulators didn’t recognize the mortgage securitization risks knowledge management,we can make out some rules to distinguish credit risks,which are establishing one personal credit rating system for customers and setting up the data can use the system to analyze customers’credit index, customers’credit history and the possible changes which may incur the same time,we should also watch on the changes of customers’property and ine to recognize potential risks. and Calculating Credit RiskAfter distinguishing the credit risks,we should assess the risk exposure,risk factors and potential losses and risks, and we should make out the clear knowledgeable staffs in banking should use statistical methods and historical data to develop specific credit risks evaluation model and the regulators should establish credit assessment system and then set up one national credit assessment the system and the model of risk assessment,the managers can evaluate the existing and emerging risk factors,such as they prepare credit ratings for internal firms,including Standard ＆Poor’s,Moody’s and Fitch,are in the business of developing credit rating for use by investors or other third Ⅰshows the credit ratings of Standard＆Poor’s.TABLE ISTANDARD＆POOR’S CREDITT RATINGSCredit ratingsImplicationsAAABest credit quality,extremely reliableAAVery good credit quality,very reliableAMore susceptible to economic conditionsBBBLowest rating in investment gradeBBCaution is necessaryBVulnerable to changes in economicconditionsCCCCurrently vulnerable to nonpaymentCCHighly vulnerable to payment defaultCClose to bankruptDPayment default has actually occurred After assessing credit risks,we can use Standardized Approach and Internal RatingBased Approach to calculate the in this article,we will analyze how Internal RatingBased Approach calculates credit risk of an uncovered loan.To calculate credit risk of an uncovered loan,firstly,we will acquire the borrower’s Probability of Default(PD),Loss Given Default(LGD),Exposure at Default(EAD)and Remaining Maturity(M).Secondly,we calculate the simple risk(SR)of the uncovered loan,using the formula as following:SR=Min{BSR(PD)*[1+b(PD)*(M3)]*LGD／50,LGD*} (1) Where BSR is the basic risk weight and b(PD)is the adjusting factor for remaining maturity(M).Finally,we can calculate the weighted risk(WR)of the uncovered loan,using the following formula:WR=SR*EAD (2) From(1)and(2),we can acquire the simple and weighted credit risk of an uncovered loan,and then we can take some measures to hedge the credit risk. Credit Risk After assessing and calculating credit risks,banks should make out countermeasures to reduce the measures include：(1)Completing security system of loans. The banks should require customers to use the collateral and guarantees as the security for the repayment,and at the same time,banks should foster collateral market.(2)Combining loans with may require customers to buy a specific insurance or insurance the borrower doesn’t repay the loans,banks can get the pensation from the insurance pany.(3)Loans Securitization. Banks can change the loans into security portfolio,according to the different interest rate and term of the loans,and then banks can sell the security portfolio