Research On Credit Risk Management Of ICBC Jilin Branch

Bank is a special enterprise which is engaged in money management. Because of its operations in all aspects of the socio-economy, banks are facing and encountering a wide range of risks, including credit risk, market risk, liquidity risk, operational risk, reputation risk and so on. So in a sense, bank is also an enterprise dealing with risks. The management and the risks of banks are closely related to each other with particularity and specificity.Credit risk management is a critical component of the comprehensive risk management of bank. The high level of credit risk management is a necessary condition for the sustainable and healthy development of bank. For a long time, the commercial banks of China are still weak in risk management and control. The lack of credit risk management leads to a large number of non-performing loans (NPLs) generated in the process of handling credit. Since the establishment of the Industrial and Commercial Bank of China, the historical burden of NPLs has been constraining its development and expansion. Therefore, improving the quality of credit assets is the most important task for the development of ICBC, while to improve the credit quality of assets should firstly study the level and capacity of credit risk management.Credit risk management is the most important content of modern commercial bank's risk management, and is also the most challenging factor. The level of credit risk management is directly related to the operations and development of commercial banks. Especially since the global economic turmoil and great changes in 2009, the U.S. sub-prime mortgage crisis gives us an early warning signal of risks to China's banks and financial regulators of risk management. If not effectively identify and control the credit risk, the excessive risk backlog and over-expansion will only lead to extinction. Therefore, in the present international economic and financial situation, the research of commercial bank's credit risk management is of great urgency. The paper analyzes the comprehensive credit risk management that implemented by Jilin Provincial Branch of China's Industrial and Commercial Bank since 2005, at the same time discusses the problems that exits in current credit risk management. Then we'll do the research on how to build a more effective credit risk management system and improve the credit risk management framework, and then realize a whole process of credit risk management, including risk identification, risk quantification, risk assessment, risk control. The paper consists of six components:The first part is the introduction. This part will mainly introduce the background of the thesis and the implications of credit risk and credit risk management, and then put forward the importance about implementing the effective management of credit risk.The first chapter is an overview of commercial bank's credit risk management. Firstly, we'll define the basic concepts of credit risk management of commercial banks, including credit risk, credit risk of bank and so on, meanwhile sum up the unique characteristics of credit risk, which is the most important risk form in banks. By analyzing the inherent and external factors of credit risk, the paper summarized the main method for current management of credit risk. After understanding the related concepts of credit risk, there will be a brief introduction about "The New Basel Capital Accord" on the three pillars and risk measurement methods. By introducing its requirements of commercial banks'credit risk management, we'll discuss and explore the practical significance of credit risk management in China, establishing the foundation for our in-depth study below.The second chapter is mainly about the analysis on the present situations of credit risk management in Jilin Provincial Branch of ICBC. After the shareholding system reform in 2005, through the years of development, the Jilin Branch that used to be a big loss-making bank with heavy burden of institutional redundancy, poor asset quality, and serious non-performing loans, is gradually developing into a profit-making one. Since then, the Jilin Provincial Branch has downsized the work forces, streamlined its institution, and improved the asset quality. Though its economic value has added from negative to positive status, the profit is still limited. Especially in 2009, compared with the past four years, the credit assets of Jilin Provincial Branch have achieved a steady growth. There has been a substantial increase in total assets of credit, as well as an effective adjustment of credit asset structure. The non-performing loans and bad loan rate has also decreased substantially. Meanwhile, the credit quality of assets is still improving. However, from the analysis we can see that the credit management system of Jilin Provincial Branch is still backward, the total assets is insufficient, and the credit asset quality is relatively weak and is still in poor profitability. There are still many other deep-seated problems of credit management unsolved. So not only the capabilities, but also the level as well as the means of credit risk management, need to be improved urgently.Chapter three is to design a complete credit risk management program for Jilin Province Branch of ICBC. In order to build a world-class modern financial enterprise, and to enhance its international competitiveness, we'll draw on the credit risk management experience of advanced international banks. Based on the summary of credit risk management problems generating from the share reform, the paper will study and research the models of credit risk management in line with China's national conditions and the actual situation of Jilin Provincial Branch, and then design and complete the credit risk management program. The program has defined the objectives of risk management, improved the credit risk management system, and standardized the management of credit risk as well as its operational processes. It also has realized the integration and application of risk information system, risk measurement system, risk monitoring and management system, which will improve the perceptiveness and scientificity of risk management. Ultimately due to the program we'll achieve the whole process of risk management which contains the beforehand, intermediate and afterwards control.Based on the above analysis, Chapter four will put forward some suggestions, according to the requirements in the New Basel Accord, on how to effectively accomplish the credit risk management program in Jilin Provincial Branch of ICBC. The impact of financial crisis on real economy of China that caused by external demand has transmitted into the field of economic entity. Since 2009, the proactive fiscal policy, along with moderately loose monetary policy has played a significant role in macroeconomic recovery, but yet the foundation of economic growth is not solid. The commercial banks of China are still facing the challenges of credit risk and asset quality. And it also brings great pressures to the banking industry on credit risk management. The tightening of corporate finance environment may be gradually released as real asset quality problems. As a provincial branch of ICBC, which is taking assets management of credit risk as its priority, there is a grand task to perform and a long way to go.The sixth part is the conclusion of the study. Through the analysis of credit risk in Jilin Provincial Branch of ICBC after the joint-stock reform, the paper has come up with a program of credit risk management. Currently, in China, the commercial bank's credit decision is mainly a qualitative one based on expert judgments. However, in the international arena, as the core of bank risk management techniques, risk measurement has developed rapidly over the past 10 years. International active banks have widely used the risk measurement technology to measure the credit risk, market risk, operational risk, even the allocation of capital. This result has gained recognition of the Basel Committee and has been widely reflected in the New Basel Capital Accord. Currently, the domestic commercial banks should draw on the advanced risk management methods of foreign countries actively, and accumulate a large number of available data to carry out the study of credit risk management. The research of this paper has provided an effective and powerful result precisely for this transitional period. Looking forward to the future, the risk management capability of Jilin Provincial Branch of ICBC will certainly be further improved.