Study On The Disposition Models Of Non-performing Assets In China's Construction Bank

This thesis makes researches into the disposition models of non-performing assets (NPA) from the perspective of commercial bank combined with the author's working experiences in a state-owned commercial bank. Firstly, it introduces and compares different disposition modes in and outside China. Then it reviews the background, overall scheme and experience of disposition models of NPA in CCB, focuses on the innovative practices in Chongqing branch. Since the disposition of NPA has been a major task in banking, the author chooses it as the topic of the thesis, makes theoretical researches and practical analysis based on both the global background and local practices, overall scheme of the headquarter of CCB and innovations in Chongqing Branch, thus providing references on the best model of disposing NPA for commercial banks in China.The first part introduces the definition of NPA and its economic indicators of Five-Degree Classification.The second part introduces the disposition models of NPA in different countries, namely, the internal model and external model. It mainly introduces the internal model which includes centralized model, decentralized model and semi-centralized model. Choosing three key indicators of cost, efficiency and risk control during the management of a commercial bank, the author compares and analyzes both the advantages and disadvantages of different models, draws forth his sub-argument, that is, centralized model is the most efficient one with relatively higher costs of management and stimulation, concentrated risks but easily to control. Decentralized model leads to low efficiency with lower costs and dispersive risks which are difficult to control. Semi-centralized model has relatively high efficiency and costs reasonably, bringing with it concentrated risks which can be easily identified, prevented and controlled. Each model has its own advantages and disadvantages, and there are interactive and complimentary factors among them. To choose a suitable model, such factors should be fully considered as the scale and distribution of NPA, the restraints of external policies and environment, the institution and managing system of a bank, the development strategies and so on.By analyzing those factors, a sub-argument is drawn forth, that is, joint-stock banks and urban commercial banks should choose centralized model to gain efficiency and profits in disposing NPA. Large-scale state-owned commercial banks should take full consideration and be more flexible in the choice of disposing model of NPA,because they will meet much more difficulties in order to guarantee stability and continuity during the reform from a semi-centralized model into a centralized one., It is suggested that three steps should be taken to build the disposition model, that is, from centralized management to direct management, direct management to independent management, and independent management to divisional management.The third part introduces the internal centralized model of NPA disposition in CCB. In this part, the author firstly analyzes its background from both macro and micro views. Then he reveals its features and advantages. This model has such features as independent accounting, clarification of responsibilities and profits, balance of distribution power of resource and responsibility, transition of a business unit into a management center, vertical management of sub branches and so on.To sum up, this model has professional, reactive, informational, resourceful and operational advantages. At last, the author introduces the target of the model, i.e., to set up a center of costs and profits in special. The author holds that at present stage, it is realistic and objective to set up a center of cost, which will transit into a center of profit at a suitable time.The fourth part forms the basic frame and structure of internal centralized model from four aspects of "financial accounting, assets pricing, performance appraisal and organization". In financial accounting, un-embedded financial management model is applied.The Special Assets Disposition Division only simulate independent financial accounting, not independent financial accounting, and as a center of responsibility, it organizes professional financial team and staff from the present Division of Planning and Finance in the headquarter and Chongqing branch. In asset pricing, it applies the result of KPMG audit as a main indicator to determine the expected loss rate and calculate the transference price of NPA. Shown in a mathematic formula, the transference price of NPA equals the original asset valuex(1-expected loss rate). In performance appraisal, following the principle of "paying equal attention to efficiency and profit, physical quantity and real value, " the Chongqing branch model focuses on business appraisal,then financial appraisal, as well as the achievements of management. In organization, steps are taken to set up vertical and flat special assets disposition structure adapted to the centralized model.At last, through statistics analysis, the author concludes that this model reflects the best combination of cost, efficiency and risk control in disposing NPA.The fifth part introduces the practices and innovations of internal centralized model in CCB,Chongqing branch on the ground of the author's own working experiences. In 2008, in the overall reform scheme of its headquarter, the Special Assets Disposition Division in CCB, Chongqing branch set up an internal management model by following the principle of " direct management, center of cost, accounting simulation and independent appraisal". The author explains the model in detail, such as, the organization, financial accounting simulation, method of cost accounting, method of profit confirmation and financial report. Since Chongqing branch differs from its headquarter in the model of transference pricing, the author explains and analyzes the contents of internal transference pricing model,he holds that this model is reasonable because it clarifies different responsibilities between the Credit Management Division and the Special Asset Disposition Division. As a transitional method of pricing, it reduces the conflicts between the two divisions before the final establishment of a wholly centralized model. Finally, by analyzing two cases, the author concludes the achievements of Chongqing internal centralized model.By comparing different major disposition models in the world and analyzing a large sum of data, models and cases,this thesis reveals the necessity of disposition models in the commercial banks in China, provides theoretic and practical references for other researchers on the ground of practices, cases and effects of disposition model of NPA in CCB, Chongqing branch.