A Research On The Credit Risk Management Of Commercial Banks

Credit risk is one of the biggest risks faced by commercial banks in China. As China deepens its reform and integration with the global economy and as the opening day of China's financial industry for WTO comes closer, China's commercial banks are facing unprecedented competitive pressure and ever growing financial risks. Therefore, learning the experience from international banking industry and exploring suitable approaches for credit risk management are of great theoretical and practical significance for China's commercial banks in fostering their international competitiveness. This article analyzes the status quo of credit risk management of China's commercial banks after defining relevant basic concepts and points out the main existing problems: inadequate understanding of the importance of risk management; lack of an internal institution to comprehensively control the entire risk of bank; lack of effective risk identification and assessment system and internal review system; lack of supervision power on internal control system and its execution result; and lack of effective information exchange and sharing system.On credit risk management theory and system, according to New Basel Capital Accord, this article explains the internal control system of commercial banks of western countries (e.g. Germany and US) and analyzes that of China's commercial banks focusing on credit risk management. So far, China's commercial banks has many problems such as extensive loan increase, people dictation, carelessness and ineffectiveness and poor incentive/binding system, which could not meet the demand of financial innovation. The establishment of risk management system for China's commercial banks will be a complicated, systematic program, which requires scientific planning and execution according to market rules, state financial strategy, general standards of international commercial banks and the reality of domestic banks. In the latter part, this article discusses about establishing credit risk management model and tool for China's commercial banks after making comments on those of general commercial banks. In consideration of China's reality, by referring to the experience of international banking industry, China should take "EDF Model" as the main direction with other models and approaches as complementation, focusing on the establishment of credit risk management database system and the construction of trust culture. This article takes Mingsheng Bank, a fresh force of China's joint-stock commercial banks, as an example to discuss about the explorations made by China's commercial banks in credit risk management to provide a clear direction for China's commercial banks to enhance their credit risk management level. Mingsheng Bank is a very successful commercial bank in credit risk management in recent years. Its uniqueness lies on its efficient credit risk management system consisted of three supporting systems: the independent credit assessment and approval system, credit checking and audit system, and technical supporting system, or the "data collection" technological system.