Credit Risk Assessment And Management Of The Commercial Banks Of China

Credit risk is one of the most ancient and the most important financial risks in the financial market. In the modern society, the creditability of a country can directly reflect the market orientation of economy. Bank credit is the most important and the most basic credit form of the whole social credit system.Recent years, with the growing extension of the business of commercial bank, the trade of credit asset and its derivative products is growing more and more. The credit risk management has become one of the key points of bank management. To establish a scientific and effective credit management system has become the key measure to improve the level and performance of business. However, the current credit risk management of commercial bank in China is unsatisfied. The credit risk management system is uncompleted; the credit risk assessment methods are backward. It is urgent to provide an outline for the credit risk management study of commercial bank in China.In this paper, the credit risk management assessment of commercial bank is discussed considering the features of credit risk of commercial bank in China. The meaning and features of relevant concepts of credit risk management are concluded here. The reason of commercial bank risk is systemically analyzed from macro and micro point of views; a further study on the reason of exiting problems of credit risk management in China. The modern risk assessment method of foreign bank and its applicability in China are analyzed. Considering the present status in China, taking the financial data of the Listed Corporations as variance and taking the ST and its partnership non-ST corporation as sample, the credit risk assessment model composed of factor analysis and logistic regression analysis is constructed. The positive analysis is carried.In Chapter 1, the meaning, the development and evolution process and the features of credit risk are analyzed; the types of commercial bank credit risk and the processing methods of credit risk are analyzed. The credit risk of commercial bank covers mobility risk, investment risk and credit and loan risk. As the credit and load business is the core and main body of commercial bank business, the risk of credit and loan is the main object of credit risk management for commercial bank. The credit risk referred to in this paper means the narrowly defined one, represented by the credit and loan risk management. In the process of credit management, the commercial bank can take disposal methods of risk prevention, risk evading, and risk disperse and risk transfer.In Chapter 2, the current situation of credit of commercial bank in China and the current situation of credit risk management. The reason of commercial bank risk is systemically analyzed from macro and micro point of views: in macro point of view, it includes the factors of the system, market and supervisory; in micro point of view, it includes the factors of the bank itself, including the lack of risk sense of bank, the lack of effective interior control system and risk prevention measures. In credit risk management aspect, the commercial bank in China has made progress, while the problems of weak base for credit risk management, uncompleted credit risk management and the backward credit risk management model still exist. The commercial bank needs to improve the inner risk management system and develop the credit risk assessment model suitable for applying in China.In Chapter 3, the foreign and Chinese credit risk assessment methods are introduced. The applicability of foreign credit risk assessment in China is analyzed. The foreign models of Credit Metricks, Credit risk+, KMV model and Credit Portfolio View can be applied to analyze the credit risk by quantization, but for the problems of data and normalization of stock market, it is difficult to apply these models in China. It can be said that there are not sufficient premise conditions to apply the modern credit risk management in China. For credit and loan risk management, the methods of"four grades classification"and"loan five grades classification"are applied to asses the credit risk of commercial bank in China. With the market globalization and the competition, to strength the assessment and prediction of credit risk is becoming more important under the current conditions.In Chapter 4, the positive analysis on credit risk predication based on factorial analysis and Logistic regression. In sample selection, the ST Corporation is selected as the sample in financial distress and considered the one which will bring credit risk for bank; while the non ST Corporation is selected as the normal corporation sample. 26 corporations of ST in 2003 are selected as study sample; for partnership samples selection, namely the Non-ST Corporation Sample, it is required that it should belong to the same industry. The foundation and list time of corporations should be close and should be with the close average asset scale. The samples shall be of 52. For the year selection of sample, the data of corporation 1 year, 2 years and 3 years before ST are selected to predict separately. For data variance selection, the finance data system of the listed corporation shall be considered; 22 financial data are selected referencing the past study results. Certain combination is carried by factorial analysis. The factor obtained shall be regarded as variance. The ST Corporation shall be assigned the value of 1; while the non-ST corporation shall be assigned the value of 0. The relevant data shall be input to SPSS statistical software for logistic regression. The predication results are satisfied. That can prove that to predict the future status of corporation by financial data and make management for bank credit risk is applicable. Based on the results, it can be said that to apply the factorial analysis and Logistics regression in combination can avoid the subjective selection of financial data based on personal experience. When getting closer to the year of being ST, the predication rate of model is higher. However, according to the discovery system and Annual Announcements of the listed corporation in China and the relevant foreign studies, it is recommended that to apply the financial data of T-2 years of the listed corporations to predict if the corporation can be ST in year of T. by thus, to over-value the predication ability of model can be avoided and it can provide the early warning signal of high accuracy 2 years before the financial distress occurs.The credit risk Logit model constructed on base of the financial information of loan customer of the listed corporation of commercial bank in China can provide the objective foundation to judge the credit risk of borrower for bank and to reduce the rate of non-performing loans. It can also provide the valuable information for corporations to strength the inner management. It can be applied as the effective transitional form between the long-term adopted qualitative analysis method and the international popular credit risk measuring model. For the complicate bank credit risk management system, there are many subjects worthy further study. It is expected that the discussion in this paper can provide some methods and outlines for the credit risk assessment of commercial bank in China.