Application Study On The Risk Based Loan Grade Classification Method In Our Country

The main loan classification methods are: the term based loan classification method which divides different loan quality classification according time of breach, the risk based loan grade classification method which divides power degree according possibility of returning loan and the risk value classification method which calculates risk value according anticipated loan loss. As regards our country's present reality, it is a more realistic and better choice to implement the risk based loan grade classification method. Even so, the implementation of the risk based loan grade classification method in our country is not in one move, but circuitous. Even to this day, though this method has already entered the stage of popularizing in an all-round way in the commercial banks of our country, still exposed a lot of questions and deficiencies in its application practice. The task of improving credit management of the commercial banks and setting up credit culture on the foundation of risk is still very arduous. Meanwhile, looking from world, though there are a lot of countries which implement the risk based loan grade classification method, the differences of concrete method and intension in various countries are still very great, unified standard and system await to take shape.The empirical analysis on the situations of implementing loan five grades classification method in commercial banks of our country is favorable to find existed question and insufficiency, and promote better popularization of the risk based loan grade classification method in our country. Through the data about loan five grades classification which is offered by 2002 , 2003 annual reports of four listing shareholding commercial banks , I has analyzed the overall quality of the loan of these banks, and has compared the difference of four grades classification and five grades classification, meanwhile, has analyzed the situation of loan provision in the loan five grades classification method. The result of the empirical analysis indicates that the overall quality of loan in these listing shareholding commercial banks is good, and the loan loss provision is comparatively abundant. But the same as state-run commercial banks, they exist the difficulty and question in various degree during theprocess of applying the risk based loan grade classification method.In order to adequately bring the constructive function of pushing the risk based loan grade classification method into play, reduce the negative effect because of using improperly, we should set off from reality to explore a set of system of the risk based loan grade classification which is suitable for the national conditions of our country in practice. To raise international competition of banking and meet the challenge of the opening of finance in an all-round way, it is our inevitable choice to supervise and administer bank according to current international criterion. However, because of the limitation of realistic condition, it is impossible for banking of our country to adopt directly the internal ratings based approaches of new Basel capital agreement. We should transform and perfect the risk based loan grade classification method which is the jumping-off of setting up internal ratings based approaches, and carry out the transition gradually to internal ratings based approaches on this basis. Aiming at the realistic problem of lacking the quantity index the large elasticity and the strong subjectivity in the loan five grades classification method in our country, it is dispensable to set up a improved quantization model of risk based loan grade classification which can better reflect the true status of the risk of loan. Similarly, it is necessary to adopt the pointed countermeasure and measure qually to other questions and deficiencies which appear in the course of implementing the loan five grades classification method .It is believed that a set of system of the risk based loan grade classification which is suitable for the situation of our country will play a positive and importa...