The Credit Rating and the Risk Management of Banks

Based on the data of China's domestic credit rating agencies, this paper researches the influence of credit rating on bond markets, and how domestic banks use credit rating to manage risks. It is found that both bond rating and issuer rating significantly impact bond market, but bond rating has a more significant influence, and the issuer rating has a complementary function to bond rating; when the bond rating can not evaluate the quality of bonds, the function of issuer rating is more prominent; in addition, the function of credit rating in issue market is different from that in trade market, and the influence of credit rating in trade market is smaller than that in issue market because investors absorb the new information of market after the bonds are issued and reduce their reliance on credit rating. Therefore, banks should make full use of various rating information, and combine the market in which the bonds are traded to manage risks.