Research On Credit Asset Pricing Of Commercial Banks In China

Since the reform and opening-up, China has not only been experiencing great economic and social changes, while also vigorously promoting the reform of the financial system, so as to create a harmonious and healthy environment for financial sector to grow up faster, and do more good to China’s economic development and social progress.Interest rate reform is a keystone in the financial system reform. In the past several decades, China has formed the current pattern of the formation of loan interest. Specifically, the Central Government regulates the benchmark deposit and lending interest rates and the floating range. Commercial banks is allowed to determine the price of its credit assets, based on the relevant provisions of the Central Bank, the floating range and the benchmark deposit and lending interest rates. As a result, domestic commercial banks often put no enough emphasis on credit asset pricing model and system. However, with the accelerating of the interest rate reform and the fact that the interest rate system will sequentially promote in the further, it will be turn out to be a truth that commercial banks have greater autonomy in pricing of credit assets. On the occasion, if commercial banks do not have a practical credit asset pricing model which helps to build core competencies and match the conditions of China, commercial banks will suffer from it, because of a shortage of core competitiveness, which will lead to a low income level. In the process of interest rate reform, the deposit and loan business which still composes most of the commercial banking business will experience greater challenges.Based on interest rate reform process in China and commercial banks’ management capacity and other realities, This paper provides a set of credit asset pricing method based on CCA approach, to provide a valid path for Chinese commercial banks’ credit asset pricing.This paper uses the balance sheet method, CCA approach, industrial risk analysis, value at risk (VaR) method, the risk table analysis, stress testing and sensitivity analysis, combines the theoretical analysis and empirical analysis, cross-sectional data and time series data, the total analysis and structural analysis to get the integrated probability of default, taking the industry into consideration in the process of credit asset pricing. By putting two hypotheses, the proposed method could be applied to non-listed companies. An example based on Nanning Sugar’s loan is showed to prove the practical applicability of the proposed method, including relevant credit risk analysis and asset pricing estimates.In the future, when commercial banks’ autonomy in the pricing of credit assets is released, China’s commercial banks will face the coexistence of challenges and opportunities. Building an efficient credit asset pricing system which is suitable for the conditions helps to improve their core competitiveness, so as to guarantee a healthy and orderly development.