Research On Credit Institution Of Large Commercial Bank And The Form Of Relationship Lending

SME is playing an important role in our national economy, but financing constraints is the top question of SME. International and domestic academics hold the opinion that the source of financing constraints is information asymmetry between banks and enterprises. Relationship lending is playing a major role in revolving information asymmetry and SME financing. Theorists think that lager banks are appropriate for using transactional credit technology to make loans to large enterprises, small and medium banks have advantages of using relationship lending to make loans to SME. The opinion is that large banks are not appropriate for using relationship lending to SME, hence they are difficult to make loans to SME.However, now large banks are facing the situation of the transition of financing institution and fierce competition of banks, they need develop new clients such as SME clients. The problem is that SME don’t have enough security guarantees, and traditionally transactional loan technology is not appropriate for SME. Hence, it will be inevitable for large banks to use relationship lending. This paper is going to research the relations between large banks and relationship lending.This paper will analysis the relations between loan institutions of large banks and relationship lending using theory and empirical approaches. The theory analysis contains two sides:first. the incentive and restraint mechanism of banks influences the quantity of soft information; second, the distribution of credit approval authority influences the used degree of soft information. The analysis result shows:(1) when there is no moral hazard. the more rewards, less punishment, and the larger expected profit and the more soft information.(2) central bank determines the distribution of credit approval authority by comparing delegation costs and information costs.Above all, the present credit institution is bad for relationship lending. When making loan for SME. banks should design reasonable incentive and restraint mechanism. And the approval authority should not be "one size fits all", banks should compare the delegation costs and information costs.