Credit Risk Transfer And Commercial Bank Performance

Credit risk is the main risk that commercial bank faced in the management. Before the emergence of credit risk transfer (CRT) market, commercial bank had to hold the loan before maturity or default. At that time, commercial banks manage their credit risk by scanning, monitoring, and decrease risk concentration. The emergence of CRT market increase banks'flexibility in credit risk management. Furthermore, CRT market provide new investment chance for the non-bank financial institutions and make the financial markets more deep and wide. Thus, it would be helpful for CRT market development to analyze the influence of CRT market on the commercial bank.In order to analyze the problem, this thesis is constituted by three parts: analyzing of the CRT market's background based on the reviewing of overseas'market development; theoretic and empirical research on the influence of CRT market on the commercial bank.The main structure and viewpoint is as follows:Chapter 1 is the introduction of the whole paper. The research background and literatures are explained, and the significance and main innovations of this paper are also introduced.Chapter 2 introduces the background, characters, and the trend of the CRT market. Commercial bank's desire to improve credit risk management can be explained as the main reason of CRT market development. At the same time, credit risk model and non-bank financial institutions provides base for the market. While there are many differences among CRT market in different country, the whole market represent four characters as followed: rapid growth, transaction complexity, high concentration and lack of liquidity. With the development of the CRT market, it would play more important role in financial market. Chapter 3 applied game model, test the influence of CRT market on the commercial bank based on analyze of information asymmetry. At the high end credit market, there is a credit risk transfer proportion interval, at there, lower deposit and loan interest rate can be reached. It means appropriate CRT transaction could reduce the financial cost of the bank and the firm. At the low end market, credit risk transfer proportion negatively related with bank credit monitoring level, and convex related with interest rate and threshold of the market. That means CRT transaction decrease bank's credit monitoring effort. At the same time, the lower the moral hazard level and the credit monitoring ability, appropriate CRT transaction is more efficient.Chapter 4 give a further study on the influence of CRT market on commercial bank based on the penal data from America's derivatives market. The empirical results are as followed: (1) CRT transaction decrease banks'credit monitoring effort; (2) CRT transaction of banks not resulted in lending scales on the increase; (3) CRT transaction has not changed banks'risk levels because they had balanced risk and benefit of CRT transaction; (4) CRT transaction has not changed banks'benefit performance.Chapter 5 focuses on risks and supervisory approaches for CRT market. After introduction of CRT market development and supervisory approaches in China, the paper analyze some factors that should be considered at the process of develop regulations and supervisory approaches. Supervisors have developed regulations and supervisory approaches focused on securitization and credit derivatives because of risks of transactions. Based on the analysis on the supervisory approaches of overseas, the paper puts forward some suggestions on develop china CRT market supervisory approaches.Chapter 6 discusses the development of our country's credit risk transfer market. We can concluded CRT market in China had market basis based on the analysis of commercial banks'credit risk management, credit volume and institutional investors'asset. In order to develop CRT market successfully in China, experimental institutions and instruments should be introduced because of obstacles in CRT market's development process. After the supervisory approaches and transaction rules had been reformed based on these experiences, the limits of transactions can be released. At last, some countermeasures have been given on CRT market development in China.In sum, the ultimate aim of this dissertation is to analyze the CRT market development, the influence of CRT market on the commercial bank and the development suggestions. CRT market development is laggard in China and these results may provide a relatively reasonable framework for Chinese CRT market development. Based on above study, the possible aspects of innovation of this dissertation are followed:Firstly, it explores the background, characters and development trend of the CRT market, and the conditions of CRT market growth also been analyzed.Secondly, through establishing the game model based on analyze of information asymmetry, influence of CRT market on commercial banks'credit monitoring level, interest rate, and the threshold of market were discussed.Finally, based on the penal data from America's derivatives market, the paper tests the influence of CRT market on commercial banks. To some extent, this kind of improvement provides more realistic and reasonable description of credit risk transfer.