Research on Bank Financial Risk Control Mechanism Based on KMV Model

Abstract

Starting from the loan users, KMV model transfers the evaluation of credit risk from the perspective of banks to the perspective of repayment enterprises, and judges whether the lending enterprises have repayment ability as the basis for evaluating credit risk. Credit risk is the core risk faced by commercial banks. When the economic situation fluctuates, people's economic expectations will gradually change, and the behavior of borrowers will also change. This paper studies the financial risk control mechanism of banks based on KMV model. This paper studies the credit risk status of 11 listed banks in China from 2018 to 2021, in order to observe whether macroeconomic changes have affected them since the new normal of economy. The empirical results show that the volatility of large commercial banks in each year is obviously lower than that of small and medium-sized commercial banks. The fluctuation range of weighted average default distance of large commercial banks is obviously smaller than that of small and medium-sized commercial banks. The empirical results show that KMV model has strong credit risk identification ability. The smaller the average default distance of an enterprise, the greater the corresponding default risk.