Study On The Credit Risk Management For Commercial Bank

Credit risk management lies in the core for bank management. In China, bank lending takes more than 1/2 of the total finance of the society. As the commercial banks pursue the maximization of the profit, high uncertainty in the credit market will lead great risk. In order to study the credit risk for commercial banks, and seek the measures of the risk mitigation, this thesis firstly reviewed the previous literature, used samples from Minsheng Bank-2335 individual loans that took place in Nanjing between 2003 and 2005, and 602 business loans took place between 2003 and 2004-the author study the factors influence the credit risk, by LOGIT and duration model. Therefore the following conclusions can be drawn:The factors influence the individual mortgage loans include, the characteristics of the borrowers, and the characteristics of the loans. The logit model shows that the top three factors that influence the credit risk is loan interest rate, loan-house-price ratio and share of monthly debt-service of the family income. If the lending interest rate increased by 1 percentage point, the default possibility increase by 13.1 percentage points. If the loan-house-price ratio rise by lunit default possibility will increase by 11.3 percentage points; if the share of monthly debt-service of the family income rises by 1 unit, default possibility will increase by 11.8 percentage points. The duration model shows that loan interest rate is the largest influential factor, which 1 percentage point rise will advance the average default time by 2 years, keeping other variable at their average level.For the business loans,6 variable have greatest impact on the potential default possibility, which are profit sales ratio, inventory turnover rate, cash ratio, interest coverage, diversity of the products, age of the company. Among them, interest coverage is the leading factor with the largest influence to the marginal default possibility, that is with the rise of interest coverage by 10%, hazard rate will go down by 13.9 percentage points. And the rise of profit sales ratio by 10% will lead to the drop of default possibility by 3.6 percentage points. The expansion of the firm age by 10% will cut the default possibility by 3.5 percentage points. The inventory turnover rate and cash sales ratio play a minor effect on the default possibility, each rises by 10% will lower the default possibility by 2.8% and 1.6% respectively.