An intelligent system for assessing risk management in commercial banks

Pao Yue-kong Library Electronic Theses Database

An intelligent system for assessing risk management in commercial banks

 

Author: Chan, Hok-sum
Title: An intelligent system for assessing risk management in commercial banks
Degree: M.Sc.
Year: 1998
Subject: Banks and banking
Neural networks (Computer science) -- Design and construction
Risk management
Hong Kong Polytechnic University -- Dissertations
Department: Dept. of Computing
Pages: 102, [10] leaves : ill. ; 30 cm
Language: English
InnoPac Record: http://library.polyu.edu.hk/record=b1439164
URI: http://theses.lib.polyu.edu.hk/handle/200/5168
Abstract: Throughout all these years, banks have exercised extreme caution in granting credits to clients. However, the control over the excessive utilization of the pre-approved credit facilities is an area where many banks have faced difficulties. Clients always try to maximize the usage of the bank offered facilities in order to take the best advantage of doing their business. Therefore, overdrawing the credit facilities is very common in everyday banking operations. On the one hand, banks normally will not reject the clients right away when overdrawn transactions are presented by them as it would hurt the well established relationship between the clients and the banks. On the other band, there is no strict rule for the bank employees to follow so that overdrawn transactions presented by particular clients can be unconditionally accepted. Conflicting decisions are always made which constitute arguments between risk control staff and business promotion staff. They always plead each other that they are not seeing things in the right angle. For the past years, Artificial Neural Network (ANN) has been widely studied in the academic field and even adopted by some organizations in Western Countries in solving their problems relating to forecasting, classification and pattern recognition. The result has been quite promising and fruitful. But up to this writing, no study has attempted to model the decision making process of the risk managers in arriving the decision of either 'accept' or 'reject' the overdrawn transactions presented. This study tries to serve as a starting point to apply ANN in tackling risk management issues in the field of banking industry regarding the decision making on whether 'accept' or 'reject' the overdrawn transactions presented by clients. ANN is used to mimic what risk managers do during the approval processes. Results generated by ANN will be compared with that generated by a statistical tool - Discriminant Analysis (DA) and see if systems built by ANN is really feasible for further development in the banking industry.

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