The Case Study Of Non-performing Loans Of Bank A Daqing Branch

Banking industry is important to economy. Once there is a crisis in this industry, the economy will be harmed heavily. Non-performing loan ratio is one of an important ratio to measure operation ability of banks. It can indicate the economy condition of a country. From the experiences in foreign countries, non-performing ratio is an important reason for financial crisis, and it can even drag economy, leading to a vicious cycle. Therefore, every country's banks pay attention to manage non-performing loans. In fact, in the process of every country' banking development, it always involves in handling non-performing loans. Differ to most of countries, non-performing loans of banking industry in our country produced in central planning time before the reform, which resulted from policy factor. Besides, banks had no risk awareness at that time, and there were management problem. Through this round of rising non-performing loan ratio, we found that economic environment still played an important role, and management problems were still severe. The macro and micro factors aroused the rising of non-performing loans.China always lays emphasis on handling and prevention of non-performing loans. In 1999, China set up four asset management companies to deal with non-performing loans of country-owned banks. In 2003, China Banking Regulatory Commission set up, which enhances the supervision of non-performing loans of banks. The development of banking industry has entered into prosperous time, and the economy and banking industry realized quick and good development. Managing financial orders and joint-stock reform of government-owned banks are both to reduce the non-performing ratio. Banking industry in China has reduced non-performing loans balance and the ration in a period. In financial crisis in 2008, the banking industry was affected a little, and more and more banks in our country rank the front in the world. In the 3rd quarter of 2011, non-performing loans were the fewest, and the ratio was 0.9%. However, from the 4th quarter of 2011, non-performing loans balance started to rise up. Until now, the balance has rebounded for 16 quarters, which arouses the attention of the society. Besides that, special mentioned loans also increased. Although they are not non-performing loans, it can transform to non-performing loans quickly once the economy goes worse. With the slow development of economy in China and recession of real estate industry, there is a heavy pressure on banks in China. Therefore, it is of value to research the problem of non-performing loans. And researching the formation and prevention of non-performing loan ration can help banks manage non-performing loans better.Based on the background, this essay introduces bank A Daqing branch to explain the formation cause of non-performing loans. As Daqing is a resource city, petroleum industry contributes mainly GDP, and non-performing loans of bank A rely on petroleum industry. Besides, bank A started to make loans in 2010, and the ratio of non-performing loan was really low. Although it is lower than banking industry, the speed of its increasing is faster now, which indicates the risk of bank A. Thus, this essay refers it to a representing example to bring instruction effect for other basic banks. This essay uses empirical and theoretical analysis and case study method. Through the inquiry and discussion, the condition of bank A was acquired. With the formation theory of non-performing loans, it analyzes the formation causes and prevention and control non-performing loans to provide a reference. Before introducing the formation, this essay compares the condition of banking industry and bank A, and introduces the characteristics of non-performing loans in bank A. Then it finds out the possible reasons that lead to non-performing loans and explains formation causes of non-performing loans of bank A from the macro, banking behavior and debtor aspect. Economic fluctuations, single industry structure, the financial environment in Daqing and the government regulatory and legislation are the main macro reasons of non-performing in bank A. The low personnel quality, the poor management of loan quality and lack of risk awareness are internal reasons. As for the debtors, the credit, financial situation and management can affect non-performing loans in bank A.Lastly, this essay introduces the handling situation of non-performing loans of bank A, and finds out that the handling method of bank A was single. Combined with conclusion mentioned above, it provides suggestions to prevent and control non-performing loans from macro and micro aspect. As for macro factor, setting up a reliable credit system, pushing the financial industry reforming and industrial structure in Daqing and regulating the legislation of local government can have a positive impact. As for micro factor, banks adjusting to macro environment, enhancing risk management and enhancing quality of personnel can also reduce non-performing loan ratio. Besides, the borrowers'financial risk and management can also affect non-performing loans of bank A.