Study On Determinants Of The Low Non-performing Loan Rate Of Commercial Banks In Zhejiang Province

Studying on determinants of the quality of credit assets of commercial banks in the new circumstances is essential to encouraging the cultivation of sound financial ecology and enhancing the management and international competitiveness of China's commercial banks. On basis of a longitudinal review, this study is conducted with methods of both qualitative analysis and quantitative analysis. From the dimensions of external financial ecology and internal industrial factors of commercial banks, this paper, using comparative and case analysis, identifies the six determinants on the low non-performing loan rate of commercial banks in Zhejiang, namely the rise of private sector economy, the clear and appropriate positioning of government, the integrity of social environment, the sound supervision over banking industry, the impartial and orderly competition and the pragmatic and efficient management style. Based on the previous qualitative analysis, a quantitative analysis is conducted on the six determinants that influence the variance of quality of credit asset among provinces. The method of partial least-squares regression is applied during the analysis with data of each province drawn from year 2005 to 2008.The result indicates that determinants such as management capacity of commercial banks, economic environment, and the integrity of social environment, etc., have significant effect on the difference of NPL rates among provinces. At the final part of the paper, suggestions are made on keeping the low NPL rate of Zhejiang and improving the quality of credit asset of banks in other provinces.