A Research On Commercial Banks' Real Estate Development Loan Risk And Risk Management

Since the end of last century, the real estate industry has been in rapid development in China and has gradually become a new growth point of the national economy. It is known to all that the real estate industry is a typical capital-intensive industry. It needs great amount of capital to ensure its development. However, according to the current situation in China, very few real estate companies can pool capital directly through the capital market. Most of them pool capital indirectly through commercial banks. Therefore, the development of China's real estate industry depends more and more on the support of loans from commercial banks. Since our country is now undergoing a period of transformation, the credit system and the inner governance institutions of commercial banks are still to be perfected. Due to this fact, the dependence on banks will inevitably result in underlying risks of real estate loans. In this sense, it is of great significance for us to strengthen the research of bank loan risk management. To a certain extent, such research can help to avoid risks, to improve loan quality and to maintain a relatively healthy and stable development of the real estate industry.Based on information economics, this paper, analyzes the formation and transmission of commercial banks'loan risks from an information asymmetric perspective. It also includes empirical materials of real estate loans. And then, the paper comes to conclusion with several suggestions to manage and avoid bank loan risks.Following a principle of"from general to specific", the paper first introduces the definition and categories of commercial bank loans, describes the current situation of three most dangerous risks. Second, applying the basic theories of information economics, it analyzes the deep roots of the risks and the forming mechanism from an asymmetric information perspective; and then discusses the problem of anterior converse selection and posterior moral hazards of commercial bank loans. Third, starting from the financial characteristics of real estate industry, it analyzes the impact of real estate developing loans towards commercial banks operating risks. Fourth, taking the Industrial and Commercial Bank of China as an example, it brings forth some specific methods applied by commercial banks in their practice of loan risk identification, measurement, precaution and management. Last, according to the above analysis, the paper points out some problems and deficiencies existing in commercial bank loan risk management towards real estate development. Referring to some successful cases of foreign commercial banks, the paper summarizes with a series of suggestions: to set up a precaution mechanism against real estate loan risks, reconstruct the credit flow of real estate industry, strengthen the whole process of loan management, improve the incentive mechanism of real estate loan staff, strengthen the information cooperation between commercial banks, explore more ways to minify the risks resulting from real estate developing loans.