Handbook of Asian Finance

Financial Markets and Sovereign Wealth Funds

David Lee Kuo Chuen, Greg N. Gregoriou, David LEE Kuo Chuen

• Publisher: Academic Press
• Year: 2014
• Print ISBN: 9780128009826
• eBook ISBN: 9780128011010
• Topic: Negocios y empresa
• Subtopic: Negocios en general

Asia's miraculous recovery from the 1997 crisis ushered in unexpected transformations to its economies and financial sectors. The reasons many Asian countries are growing above 6%, with double-digit growth for a year or two in-between, are investigated by this extensive research collection. The Handbook of Asian Finance covers the most interesting issues raised by these growth rates. From real estate prices and the effects of trading technologies for practitioners to tax evasion, market manipulation, and corporate governance issues, expert scholars analyze the ways that the region is performing. Offering broader and deeper coverage than other handbooks, the Handbook of Asian Finance explains what is going on in Asia today.- Devotes significant attention to the systematic risk created by banks' exposure to links between real estate and other sectors- Explores the implications implicit in the expansion of sovereign funds and the growth of the hedge fund and real estate fund management industries- Investigates the innovations in technology that have ushered in faster capital flow and larger trading volumes

Part 1: Banking

Outline

Chapter 1 Risk Rating in Asian Banks

Chapter 2 Private Wealth Management in Asia

Chapter 3 The Banking Networks of Asian Financial Centers

Chapter 4 Dynamics of House Prices and Bank Lending in Korea

Chapter 5 The Effect of Bank Mergers on Shareholder Value and Performance in Japan

Chapter 6 A Regime-Switching Analysis of Asian Bank Stocks

Chapter 7 Embedded Predictor Selection for Default Risk Calculation: A Southeast Asian Industry Study

Chapter 8 Demand for International Reserve and Monetary Disequilibrium: Evidence from Emerging Asia

Chapter 1

Risk Rating in Asian Banks

Edward H.K. Ng, Dren Analytics Pte Ltd., 4 Burgundy Rise, Singapore 658855, Singapore, E-mail: [email protected]

Abstract

Developing robust consumer credit scoring models is notoriously difficult for Asian banks. The first challenge is the lack of good data. For that reason, many banks have resorted to internal heuristic models or Western vendor-provided ones. Such models rely on priors often disproved by empirical evidence. Given compliance requirements, banks in Basel II regimes do not have the luxury to wait for sufficient reliable data to be collected to develop credit risk models. This paper proposes a relatively easy approach to use transaction data to model riskiness. The empirical evidence obtained shows that consumer credit risk assessment can be significantly improved this way.

Keywords

Banking; Credit risk; Crediting rating; Internal rating based system and modeling

1.1 Introduction

Asian banks have longed relied on scoring models for consumer credit risk. Before Basel II, such models can be very simple as they are needed only for internal decision-making purposes. An actual Asian bank model assigns the values 1, 2, or 3 to a prospective customer based purely on the credit officer’s personal judgment on the person’s credit worthiness. No guidelines were issued on the basis by which credit quality should be assessed. Other banks turn to vendor-supplied (practically all of Western or Australian origin) credit scores. These are almost certainly generated using heuristics, a common one of which is that higher income is associated with lower credit risk. Unfortunately, such heuristics are increasingly invalidated by empirical evidence that disproves a not only linearity but even monotonicity in association. Besides, few or none of the models have been calibrated for Asian economic conditions.

Since the implementation of Basel II, Asian banks have been compelled to reconsider the reliability of their consumer credit scoring models as the outputs of such models like expected loss (EL), loss given default (LGD), and probability of default (PD) are necessary inputs into the risk-based capital requirement. Any attempt to develop robust mod...

Table of contents

• Cover image
• Title page
• Table of Contents
• Copyright
• Editor Bios
• Contributor Bios
• Acknowledgments
• Introductory Chapter. Asia Finance: The Emergence of Asia Economy and New Development in Finance
• Part 1: Banking
• Part 2: Market Developments and Governance Issues
• Part 3: Sovereign Wealth Funds
• Index