Research On The Customer Credit Evaluation Of Commercial Bank Based On The Balanced Score Card Perspective

As the financial medium between public savers and fund applicants, banks are mainly paid off by the interest of loan. Because of the gradually opened financial market and constantly climbing deposit-reserve ratio, the interest margin of the bank shrinks dramatically. The capability for banks to provide large amount loan are greatly limited. As result, it becomes increasingly important for the commercial banks to screen creditable customers and control the overall loan risk. Customer credit evaluation is the ground work for credit extension, loan examination and approval, and post-loan management. It evaluates the risks from perspective customers and serves as an indispensable procedure of risk control.A correct customer credit evaluation would facilitate the commercial bank to determine the credit line, provide high quality loan, and optimize the loan constitution in order to minimize the risk. On the other hand, from the enterprise's perspective, it is also a pass to a transparent financial market, where credit information dissymmetry could be eliminated and fund raising cost could be significantly lowered.Credit evaluation theory has been intensively studied and well developed in US and Europe. Their research on enterprise credit grading is also at the leading edge. In China, credit system has just been established and still immature. Moreover, the difference between the accounting principle in China and that in the western world prohibits direct introduction of the advanced credit evaluation models from the latter one. In this paper, we'll mainly focus on bridging the discrepancy between the well known credit theory and the specific application under China's current financial and accounting circumstance. The goal is to build up an efficient and effective customer credit evaluation system for commercial banks.From the balanced score card's perspective, we build a customer credit evaluation system through four modules, namely, finance, customer, workflow and development. Along with those modules, 28 qualitative and quantitative indexes are introduced for a comprehensive customer credit evaluation. The system weights those indexes using scoring method and analytic hierarchy process (AHP), and then sets up the correspondent grading criteria and customer credit ranks. Besides above normative research, the paper also extends to empirical study. Taking the five strongest enterprises in Hunan's industry for instance, it demonstrates that our credit evaluation system based on the balanced score card can effectively analyze the enterprises'performance and produce their credit grades that are consistent with the current evaluations from major commercial banks. Finally, we make several suggestions on the application of this evaluation matrix, as well as show some insights into the future work of customer credit evaluation in China.We believe that by linking the enterprise's performance to their credit status, and associating debt liability and loan repaying stimulation with credit grade, our customer credit evaluation system could effectively control the loan risk for commercial banks. Meanwhile, it provides valuable reference for improving the whole credit system in China.