The Research On Risks Management In Credit Card Business

Credit card is becoming more and more popular in Chinese because of its convenience; therefore, Chinese credit card industry expands quickly in those years and the banks regard credit business as theirs one of most important income resource. In western countries, the profit from credit card occupies big proportion in the total profit. Credit card could not only benefit to the issuing organizations, the cardholders, but also could change people's mind and encourage people to spend the money, which could help economy develop. Therefore, government and the issuing organizations both have aspirations to expand credit card business. During 2003-2006, China's credit card industry expanded 6 times and at the end of 2006, the total amount of the credit card reached at 5.6 million.However, it seems that, China's issuing bank put more energy on advertisement than risk management. The banks all want to have bigger portion on the credit card pie. They ignored the risks on credit card, which could bring damaged loss to the banks. According the "Three-step Theory", China's credit card industry will experience a highly expanded development, and will reach the summit during Beijing's Olympics Games in 2008 and Shanghai's World Exposition in 2010.According to South Korea and Taiwan's experience, the credit market will have many risks because of expanding quickly.Therefore, before the summit's coming, it is necessary to learn the lessons and experience from those countries for the issuing bank and administration. This article gives some suggestions to China's credit card industry; such as the role of government in supervising the market, and the role of the issuing banks. Government and the issuing banks should cooperate together to build the market. In the chapter 5, the article introduces some tools to manage the credit risks and operational risks. In the end, this article call Chinese banks on cultivating brains, which is most important thing for us.