A Research On SMEs’ Loan Pricing Mechanism Of Chinese Commercial Banks

Loan business is the core business of commercian banks, and from the microperspective, loan pricing can affect customers structures, risk situations and profit sizeof commercial banks; from the macro perspective, it is of vital importance to theallocation of resources and has a broad and profound effect to economic development.How to improve loan pricing ability of the whole industry, especially to SMEs, andset up the competitive pricing strategy has become an important theoretical andpractical problem faced by China’s banking industry. This paper has put forward loanpricing mechanism to SMEs based on adjusted risk adjusted returns model(A-RAROC) in commercial banks of our country, I adjusted three items for SMEs:thedynamic credit risk adjusted item, item of comprehensive contribution degree ofcustomers, period item. I use fully-modified KMV model to calculate the defaultprobability of listed SMEs; and KMV company’s PFM approximation Model forcalculation of the default probability of non-listed SMEs. Then, this paper adopts theasymmetrical sample extraction method to select4ST stochs and8non-ST stocksfrom the Shenzhen Stock Exchange small and medium-sized enterprise plate by31December2010,and did an effectiveness research to KMV model with Mann-WhitneyU method and two independent Kolmogorov-Smimov method, and the result showedthat under significance level of5%,our model is effective.After then I use Xcompany’s financial data to exam the effectiveness of the proposed PFMapproximation model. The research results showed that the above two methods in thecalculation of the small and medium-sized enterprise default probability was feasibile.At last, I compared the A-RAROC loan pricing mechanism and traditional RAROCloan pricing mechanism through case analysis, and found A-RAROC can get morereasonable bottom interest rate, so that it can help commercial Banks open more profitspace.