Research On Innovation Of Rural Bank's Credit Risk Internal Control System In China

Rural bank's special customers and credit environment often lead to high credit risk.Currently,the rural bank's credit risk internal control system is not sound enough since the system over-relies on copying from its initiate bank and ignores the specialty of its target market and financial environment in rural area.Therefore,to set up a reasonable,suitable,and professional credit risk internal control system can promote the sustainable development of rural bank which may provide better support for agriculture,rural areas,and farmers.Based on the methods from Information Economics and Institutional Economics,combining with the analysis on the special characteristics of rural bank operation and management,the paperstudies how to innovative rural bank's credit risk internal control system.This paper first introduced the credit risk theory and the internal control theory,then from the view of Information Economics,the author figured out the factors that could result in credit risk in rural bank system;as well as listed and evaluated some regulations and policies that related to the rural bank's internal control.Then according to the previous theories and evaluation,the paper analyzed the current situation of the rural bank' credit risk internal control system in China and pointed out the problems within the rural bank's credit risk internal control system and the reason leading to these problems.Based on the analysis of the essential problems within the rural bank's credit risk internal control system,the author designed a model system for rural bank in China to internally rate credit risk which provided the rural bank's credit risk internal rating system in China with a new point of view.At the end of the article,using the methods of Institutional Economics,the paper made several innovative suggestions against improving and completing the rural bank's credit risk internal control system which included that rural bank should improve the internal control environment,set up and develop the internal incentive system which is driven by credit risk.The paper also advised that more attention should be paid and more efforts should be made towards the completion of information system in order to reduce the asymmetry of the information in the process of the information transition and gathering.Based on above research,the papergets following conclusions.Firstly,rural bank in China are generally faced with the situation that the credit risk internal control system is nor professional or scientific.Therefore,rural bank should set up a comprehensive internal control system which is leaded by credit risk.Secondly,the credit risk internal rating system based on the credit scorecard model is more suitable for the rural bank in China to evaluate risk.By doing this,rural bank can decrease the risk of converse selecting,provide support and evidence for post-loan supervision,and prevent from moral hazard.In addition,in the process of improving the internal control system,incentive system and team action should be taken into consideration simultaneously which could lower the credit risk effectively and efficiently.Finally,rural bank should enhance the general environment for internal control and put more efforts into informatization.