The Research Of Risk Management Of Guarantee Circle For Domestic Commercial Banks

Because of the financing needs of domestic enterprises and asymmetry of information between the bank and the enterprise, the domestic financial market is gradually derived a morbid Guaranty- Guarantee Circle. Currently Guarantee Circle doesn’t have a uniform definition at home. We can define Guarantee Circle as that a number of special collective enterprises associated with each other together through guarantees or warranties and capital chains to form a special guarantee relationship, meaning complicated modes of mutual guarantee at the same time.Through an objective analysis the article finds that Guarantee Circle alleviates the financing problem of enterprises in a specific historical period, but compared with the normal guarantee and simple mutual guarantee, there is great potential risk involve Guarantee Circle as it is difficult to be identified because of concealment, relevance and risk. As the economy develops gradually into the downturn, the risk of exposure to Guarantee Circle begins to appear especially in developed areas. Credit assets of commercial banks face great potential risks, and systemic risk in financial markets begins to arise.Among the credit assets of commercial banks in the country, the problem of Guarantee Circle is widespread. In the analysis of the specific reasons for the formation of Guarantee Circle, this paper mainly states through five aspects: the first is that the enterprises’ needs for capital to develop. The second is that loans play an important role in the development of enterprises under pressure of market competition, and the third is the role of organizations. The fourth is the impact of the supply chain to Guarantee Chain and Guarantee Circle. The last is perceptual factors.In order to make a more comprehensive description of Guarantee Circle, this paper analyzes the four major risk characteristics of Guarantee Circle, including ineffectiveness, transmission risk, mutual interdependency, risk superposition. Based on the risk characteristics, this paper puts forward to the progressive approach leading to the harm of Guarantee Circle for enterprises, banks and local economy. Forced by the severity of harm, it is more important to explore how to control and deal with the risk of Guarantee Circle for China’s commercial banks. In this paper, the responses are explained through four aspects: first, to promote the construction of credit system and information sharing, and second, to improve credit management system to perfect the prevention and control system; and the third is to strengthen links between organizations to control risk transfer, and the last is to promote development of professional guarantee agencies.In order to guide the practice as better as possible, combining the theory with the reality of Wujiang, this article analyzes the causes of Guarantee Circle in Wujiang, and on this basis proposes the possible measures to prevent and resolve Guarantee Circle in Wujiang, trying to provide commercial banks in Wujiang with some valuable guidance. At the same time it will demonstrate the point of this article amply.