Credit Risk Management And Legal Countermeasures For Village Banks At Current Situation

To alleviate the serious demand for financial services in rural areas, China had begun to reform ruralbanking system and encouraged the construction of corresponding rural enterprises for rural developmentsince2006. Village banks as the novel and typical credit cooperatives emerged in this context. Ascommercial banks in a relatively small scale dedicated to provide financial services for “three agriculturalissues”, the credit risks in village banks feature them their own particularity. Some risk factors springingfrom agricultural weaknesses and low farmers credit put themselves to the urgent situation to be solved.In this paper, the author presented the credit risk particularities of village banks by the comparisonwith three distinct banks. The two theories about credit risk, the risk delivery theory and asymmetricinformation theory, lay the foundation of the following analysis. After that, the author pointed the currentsituation and defects and current management of credit risks by showing the empirical analysis of internaland external problems. Last, the author embarked on the suggestions to better the legal system. Each bankneeds to amend its internal rules and management system to decrease operation risks. The nation needs toreduce the barriers in rural property mortgage. A better rural credit system, a better deposit insurance legalsystem, and a better agricultural insurance legal system are necessary for rural development.This article specifically arranges the content as follows:The first part is the introduction, describing the history and current situation of Chinese village bank,pointing out that the credit risks are the dominant problem in village banks development and asserting thatthe legal system play the crucial and last role to forbid man-made risks.The second part is about the core concept of the credit risks in village banks and fundamental theories.The third part focuses on the current credit risk management of village banks. The author pointed thecurrent defects in legislation and credit risks management after the presentation of current legal system andpractical situation.The last part is about the legal countermeasures. Firstly, the nation need to better the legal systemabout village bank loans; secondly, the village banks need to strengthen the inner rules, lastly, both thenation and village banks need to focus on the construction of favorable external credit environment.