A Study Of Risk Management In Commercial Bank’s Green-credit Business

Since the policy of reform and opening up in the 1980’s, the economic development in China has made remarkable achievements. With the growth of economy, we also need to concern that the model of resource consumption in exchange for economic development in the past has led to the current industrial structure in China unreasonable. The lack in conducting related industries and legislation in the environmental protection policies should be furtherly corrected. These problems has brought great pressures on the environment with the rapid development of our economy. The model of extensive economic development is not a permanent solution, therefore, in the pursuit of rapid economic growth, we also need to be responsible for our future generations and keep the path of sustainable economic development. The change of the mode of economic development will bring transformation and even optimization to industries. The enterprises should upgrade facilities to achieve high efficiencies and energy saving and then fufill the transition to a green economy. In 2003, international financial industry began to advocate the implementation of the Equator Principles--the economic principles for the purpose of sustainable development. From 2007, China began to focus on constructing its green credit system and provide credit support for the development of green economy by financial industries. Through introducing of a series of documents on green credit, Chinese government provides guidance to the development of green credit and plays an important role in the sustainable development of economy and industrial optimization.For commercial banks, green credit risk management, which is different from traditional credit risk management, has a higher technical requirements in its field. The paper describes systematic concepts of green credit and combining the theory in credit risk management of commercial banks, makes comparative analysis to the status of green credit and practice of risk management for green credit in the major domestic commercial banks. By using the methods of documentation and system analysis, the paper distinguishes the risks in bank credit due to enterprise, industry, policy and imperfect procesures in bank operation and makes further analysis of the causes of these risks. In the paper, the environmental risk rating is added based on the traditional bank credit rating, under the guidance of related theories in the management of credit risk and environmental risk and by learning from the enviromental risk control of commercial banks in the main developed countries. At the end of the paper, a conclusion in the environmental risk factor control is made for our commercial banks in the aspects of before-loan research, in-loan control and after-loan management of green credit projects.The paper sorts out ten aspects in the practice of environmental risk control, summaries three methods for risk rating for the bank. Considering the status quo of our country, it also provides suggestions and couter-measures to the environmental risk control in green credit of banks in China.