Measurement of Risk-weighted Assets of Commercial Banks under the New Basel Accord and Capital Management Approach

The Basel Accord is the main worldwide regulatory standard for bank capital and risk set by the Basel Committee. It encourages banks to identify not only current risks but also future risks and to improve their existing risk management systems to manage economical risks. Since the promulgation of the Accord, the Basel Committee has issued a series of regulatory documents reforming the risk-weighted asset measurement framework. The core elements of the Accord include revisions to the Standardized Approach to Credit Risk, the Internal Ratings-based Approach to Credit Risk, the Operational Risk Capital Measurement Methodology, the Capital Floor, and the Leverage Ratio regulatory framework. In China, commercial banks, not only influence the transmission of the country's fiscal and monetary policies, but also indirectly affect the development of the country's real economy through credit investment. Therefore, the promotion and implementation of the Basel Accord's measurement index indicators and supervisory standards are conducive to the maintenance of China's financial industry's prosperous development and the steady expansion of the size of the real economy.