The Research On The Prevention Of Credit Risk Of Commercial Banks And The Selection Of Clients

The core competitiveness of commercial banks is mainly reflected in the credit quality of assets. As China's reform of state-owned commercial banks, non- performing assets of commercial banks has been much lowered. However, because of the asymmetric information, the problem of credit risk is required to solve in our current global financial crisis.In the credit market, there are information asymmetries between banks and borrowers. Enterprises know more information than banks, such as the financial position, income and risk. And this means that the enterprises are in the position of information superiority. In order to tackle the problems of adverse selection and moral hazard arising from information asymmetry, the article has introduced the theories of moral hazard, adverse selection and principal - agent relationship in credit market and relevant countermeasures. And this article has also analyzed the phenomenon of long-term credit rationing, demonstrating that the information asymmetry in credit markets could not lead the credit market to the Pareto optimal allocation of resources.The third part has explored about the specific performances of information asymmetry and the special reasons during the transition period in our country. Information asymmetries exist not only in banks and credit customers, but also between banks and banks themselves widely. The manifestation and the result of asymmetric information is the emergence of a large number of non-performing assets, the bank credit crunch and the difficulties for financing small and medium-sized enterprises. The article has focused on the reasons of information asymmetry as following. Chinese commercial banks has many internal hierarchies, and has taken the total-sub-branch of the structure of institutions, which results in the information asymmetry between credit investigator and credit decision-makers. The credit investigator is a first-hand investigation, but they don't own the corresponding credit decision-making power. there could be distortion when the information goes through several levels of hierarchies. The credit markets are functioning in the joint efforts of the credit officers, the incentives and constraints can improve the efforts of credit officers and increase their cost of moral hazard. China's commercial banks has lacked effective incentives for credit staff, and haven't had a quantitative assessment to evaluate the investigator's performance. Incentives for Investigator are mainly negative incentive, which can prevent credit risks to remedy the situation. In addition,our country's social environment for the commercial banks hasn't provided a favorable external environment. The concept of credit in the economy of our country is not yet developed. And that a lot of enterprises show different financial statements to different people is the evidence of distorting financial statements. There has been no enough attention to the importance of information. Information intermediaries hasn't played a important role, lacking of a open channels and well-developed information market. And the article has conducted a case study of asymmetric information in the credit market, describing and analyzing the whole forming process of credit risk because of asymmetric information.The fourth part has put forward the proposal that commercial banks should establish a scientific credit organizational structure. Based on the analysis of the cases and the reason of information asymmetry in our country's credit market. In view of the important role of the credit department, The article has suggest that credit department should be set up in a flattening organizational structure,and be separated from administration management of branches and subbranch banks. And it also should set up a risk assessment team to put forward independent opinions in the decision-making process. Based on the analysis of the independent credit decision-making, both of these measures could reduce the bank's internal problems of asymmetric information, with banks reducing the cost of information delivery, decision-making power at the same time. When credit advice is given to experts, business credit can be emancipated from the administration to reduce the risk of moral hazard within the banking and principal - agent relationship. In referring to the business of banks in developed countries and the successful experience of the concept, the paper should consider the depth of bank-enterprise relations, long-term development. This will not only enhance the bank's ability to access corporate information, reducing the cost of access to information the bank to reduce the transmission of information aspect, but also enhance the risk of corporate default. Because once set up enterprises and long-term credit banks and cooperative relations with the banks is equivalent to a long-term game, enterprises in order to obtain long-term loans to banks will be more information with the bank's job and investigate the performance on time. And should be encouraged to focus on long-term credit banks for equity investment clients, banks and creditors can stake dual control of enterprises, when the enterprise is not conducive to the activities of creditors or of the investment risk, banks can protect their own holdings benefits, and ownership can be through better access to internal corporate information, reduce information asymmetry between bank influence. Credit information of customers of the open network to solve the credit market is on an important means of asymmetric information. Businesses in dealing with external regulatory authorities and banks are in an absolutely dominant position in the information. Inferior status in the information the parties should join together to strengthen cooperation and information sharing. Banks should focus on the credit history of business with each other, brought about by the asymmetric information risk to a minimum. In reference to the experience of banks in developed countries, this paper can be different types of enterprises in accordance with the development of specific strategies investigate. Stage is to explore the domestic bank credit asset securitization, the paper pointed out that asset securitization can effectively prevent the credit risk of commercial banks, because the loan portfolio at the role of law of large numbers under a single loan will be showing a higher law and greater predictability. Securitization of bank assets in advance equal to the credit risk of assets transferred to the class by investors and credit agencies. And because of more stringent requirements of information in the securities market, information asymmetry between the banks can be resolved to some extent.It is suggested that credit sector should be independent of the administration of branches and subbranch. And this is the new ideas of this paper. In foreign credit market, asset securitization is used to prevent bank credit risk. But in our country its use is still in the exploratory phase. The article has discussed the role of asset securitization in the prevention of credit risk.Because of my restrictions, there are a lot of places for further development. In this article, the analysis of credit risk can also be extended to the asymmetric information between enterprises. In addition, asymmetric information between banks the analysis involves the less. Also in this article some of the strategies should be done to solve asymmetric information, such as: an independent credit department separate from the branches and branch administration. And equity investments are only an outline of the idea put forward, but for further in-depth discussion. Asset-Backed Securitization in China has just started at the stage, the relevant laws and systems have not yet been fully supported the use of asset securitization for the prevention of credit risk in practice.