Study On Risks Of Credit Granting Business Of Commercial Banks

Credit granting refers to the behavior that commercial banks directly provide fund supports to the customer or guarantee the credit of the customer to a third party in relevant economic activities.Credit granting is related to both the on-balance sheet and off-balance sheet business of a bank and is the basic business of a commercial bank.Therefore,credit granting not only affects the business development of commercial banks,but also concerns the risk control of commercial banks.As CBRC started strict supervision in 2017,Chinese commercial banks face conflicts between risk and benefit.So Chinese commercial banks need to improve credit quality urgently.Taking W branch of bank N as the research object,this paper investigates the problems and risks in the credit granting business of bank N.This paper has sorted out the credit granting business process of bank N,and found that bank N has established a standard process with detailed operational requirements and specifications.Credit granting business process of bank N can be divided into three parts: pre-loan investigation phase,review and issue the loan,and post-loan management phase.In the process,a number of staffs like client managers,team managers,distribution staffs,monitor staffs,risk approval staffs,integrated tellers,risk assessment staffs,will participate.The progress can theoretically identify responsibilities of different staffs.However,the existing process may have some problems: in the pre-loan investigation stage,it is easy to have the problem that the qualification examination of the borrower is not strict and the field investigation is not thorough;the examination and approval stage and the loan issuing stage are prone to personal judgment deviation and the examination and approval difficulty caused by the control of risks;In the post-loan stage,the risk control ability needs to be strengthened due to the unsound internal control system.The internal control compliance inspection of Bank N has also found the corresponding problems.This paper selects three typical cases of W city branch of bank N with large insurance amount in recent years for further analysis.Case 1 mainly reflects the problems exposed under the industry risk of overcapacity.Company A faced industrial excess capacity,and default on its debt because of the deterioration of business conditions of its guarantor and itself.Case 2 mainly reflects the problems exposed when the bank underestimates the consequences of the blind expansion of enterprises.Company B borrowed a loan for production lines of new products,but its new products had poor sales.Moreover,company B can't relieve the pressure of capital chain through continuing getting loans because of the financial policy at that time,which made company B default on its debt.Case 3 mainly reflects the problems exposed when the bank underestimates the market risk.Company C was a local leading enterprises,it defaults on its debt due to the risk from local guarantee circle: company C couldn't repay its debt because of its compensatory obligations performance.According to these cases,the writer believes that market risk,policy risk and operational risk are important risks in the credit approval business,among which market risk and policy risk cannot be avoided as external risks.Commercial banks should take timely and targeted measures on the basis of strengthening internal management,reducing operational risks and timely discovering market risks and external risks.According to the analysis of the business process and practical cases of credit granting,this paper puts forward the following suggestions for improvement: Commercial banks should further improve the pre-loan review of the business of granting credit,improve the incentive and restraint mechanism of credit approval business,raise the risk awareness,and improve the quality of employees and enhance the professional skills of credit extension personnel.