The credit risk macro stress testing of the Chinese banking system

In order to test the overall credit risk of loans of China's banking system, a macroeconomic credit risk model is designed, including a multiple linear regression model describing default probability, and a set of regression models describing macroeconomic environment. Studies show that bank loan default rates and key macroeconomic factors are related. Then stress tests are implemented one by one according to different shocks. The results showed that most banks continue to profit even at 90% confidence level when estimated risk of loss, reflecting a moderate credit risk in the banking system. However, if confidence level rises to 99% when estimated risk of loss, the banking system will face significant losses. The results show that it is necessary to prevent the credit risk of real estate loans and government debt.