Commercial Bank Portfolio Credit Decision-making Method And Its Application

By analyzing many cases of commercial banks worldwide since 1990s, we can know that imperfect loan decision-making is the main cause that leads to commercial bank's bankruptcy. The low quality of loan decision-making of commercial banks directly derives into non-performing loans, which possibly causes a bank's bankruptcy. What is more important is that the scarcity of loan resource objectively requires high quality and scientific loan decision-making. Therefore, it has very important realistic meaning to study loan decision-making methods of commercial banks. The current common practice in managing credit-risk in commercial banks worldwide is to set limit on the risks of single loans so that the total risks of a bank's loan portfolios can be controlled. From the points of economics, optima of single loans do not necessarily lead to the optimal portfolio, however. Therefore, it is worthwhile to further study the decision-making process in obtaining the optimal loan-portfolio. Being the advanced step of commercial bank's risk management, portfolio management can help to create banks'profit. So it is getting important in this field. The main point of this paper is to study loan decision-making method of commercial banks in view of loan portfolio's two aspects, one of which is based on a multi-objectives decision-making model with two objective functions and the other is the indefinite decision-making based on interval number Firstly, in the frame of the theory of Modern assets portfolio, this paper proposes a multi-objectives decision-making method of loan portfolio based on efficient frontier. The method establishes a risk-return model of loan portfolio's decision-making of commercial banks, and applies the relative theories and methods of multi-objectives to loan portfolio decision-making. By solving the multi-objectives optimal model via the method of geometry, this method not only dissolves the shortcoming that we cannot obtain the result of a multi-objectives model, but also can make decision-makers take into account all aspects of the item loan's request of their valuable clients or non-performing clients. This could safeguard the whole situation of the long-development targets of banks and firms. Secondly, in the premise of considering the banks'risk-bearing ability, we propose a multi-objectives decision-making method for loan portfolio based on the...