The Origin And Control Of The Consumer Credit Risk

Some statistics by Basle Committee shows that the average level of capital demand with operation risk in developed countries is only about 10% of the total capital demand, which mean the operation risk does not sit at a important position. But Mr GuJingPu , vice director of risk management committee and general manager of risk management department, thinks operation risk is the biggest risk faced by the commercial bank in China. Through analyzing the credit risk in private business sector running by two commercial banks in DaQing , we can find that the operation risk is higher than the credit risk of loanee , and it can enlarge credit risk to a great degree.The newest definition for operation risk by Basel Committee on Banking Supervision is the risk incurred due to imperfect in internal control, fault or fraud by operators, or outside events out of control. Operation risk in private credit business is referred to malpractice by operators. According to agency theory, commercial bank must take efficient measures to achieve goal congruence to avoid the ethics risk of the operators.So the emphasis should be put on the performance of each operator, to which his return is related. The focus of performance is on the quantity and quality of the assets. Under such rules, commercial banks hope the operators with high achievements keep high level, and the operators with low achievements to work hard.On the other hand, the bank should set up the risk management system, which includes the part as the followings:-- internal control system, which includes right organization structure, balance between decision-makers, company culture, operating rules, and mutual restriction between different work positions.-- internal audit only reporting to the top manager to ascertain the efficiency of internal control system and actual operation of it .-- system to appraise and monitor risk.-- information system to communicate quickly and accurately between different parts in the bank.The credit risk faced by the business organization, investor, and consumer is one...