Research On The Risk Of Real Estate Loan Of Commercial Bank In China Based On The CPV Model

In the past 20 years, the real estate industry has made enormous achievement and have been the major basic industry in our national economy which is an effective way to startup domestic demand, promote the development of economy and improve people's livelihood . The real estate industry involve all kinds of industry, need a large number of capital and has a long development cycle and finances recovery, which is a typical kind of capital-intensive industry. There are less financing channels for real estate in China. The capital demand of real estate industry depends on the system of commercial bank and the system of financing diversification including trust, stocks, bonds, and funds has not been developed already. Thus the system of commercial banks undertakes enormous risk in the development of real estate industry due to the lack of diverse financing channels and risk sharing techniques.The risk management of commercial banks in China started relatively late, most bank are still making use of financial indicators to analyse risk, rather than applying modern financial theory and Econometric approach to accurately forecast, manage and avoid the credit risk. Since the financing of real estate highly depend on the system and the development of credit risk management is relatively backward, the introduction of international mature credit risk management model to our commercial banks to strengthen their ability of risk management, improve their international competitiveness, guarantee the stable operation was of the highest importance. Therefore, this paper first compare the popular international credit risk management models, and then select the CPV model, which is the most applicable one for the Macro-economic situation in our country to do empirical research on the credit risk of our commercial banks.First, the paper introduced some related concepts and classifications about credit risk of real estate industry, and then compared the classical and modern credit risk measurement models comprehensively. At last, the paper selected to imitate the credit risk of real estate for commercial banks with the CPV model which is the most applicative to the Macro-economic situation in China. Based on the CPV model, the paper set up the calculating economical model to analyze the numerical relationship between the selected Macro-economic factors and the Probability of Default of the loan of the commercial bank. Comparing the forecast that calculated by the Grey Theory and the one that calculated by the regression model, we can find that the latter one was more accurate. In the end, it comes the conclusion of the paper, and some related suggestions.The three main conclusions are: (1) CPV model is the unique one that imitate the credit risk of real estate of commercial banks with Macro-economic situation in the four modern credit risk management models. Through the comparison between the traditional and modern credit risk management model, we can find that the CPV model is adaptive to our country in theory. The regression equation shows that the model has a high degree of fitting, which prove the applicability of the CPV model again. The empirical analyses confirmed the cognition that the Macro-economic situation has some connections with the capital position of borrowers. (2) The regression outcome shows the relationship between the Macro-economic factors selected and the Probability of Default of loan. Among the four factors, CI, CERCI, ECI shows the reverse changes in the relationship with DP, and CI is the most significant in all, which reflects the immediate impact of Macro-economic situation on credit risk of real estate loan. CPI have positive effects on DP, which reflects the relationship between illusory prosperity and the repay status of borrowers. (3)Though the comparison of the forecast that calculated by the Grey Theory and the one that calculated by the regression model, we can find that the latter one was more accurate, which shows that the paper have realistic significance on improving the ability of prediction and management of credit risk for commercial banks in China.Based on this study, we can establish our own credit risk measurement model, industrial risk ranking system, and perfect internal control system within the system of commercial banks and make great efforts from the following respects, such as the policy and law system, intermediary agent, public opinion and information sharing to enhance the accuracy of forecast of the credit risk and to strengthen the ability of risk management for commercial banks.