Title Evaluation And Prevention Of Financial Risks Of Small And Medium-sized Commercial Banks

With China’s booming economy,the number of small and medium-sized commercial banks has exceeded 4,000,with total assets accounting for nearly one-third of the overall commercial banks,and has become an important part of China’s banking system,an important force in serving the local economy and supporting agriculture and small businesses.However,with the accelerated transformation of the industry,coupled with the impact of the economic downturn,it significantly affects small and medium-sized commercial banks,causing an increase in their potential risks and hidden dangers.In addition,a comparison of large commercial banks reveals that small and medium-sized commercial banks are weaker at this stage,and are in a weaker position in terms of network,scale and brand,facing greater financial risks.Since its establishment,Bank A has continued to diversify its business and rapidly increase its asset size,and has jumped to the forefront of small and medium-sized commercial banks in Province S in recent years.However,its financial risk has been on the rise in recent years due to the persistent downturn in the market economic environment and its own inadequate financial risk evaluation and prevention capabilities.Taking Bank A as an example,this paper examines the financial risks faced by Bank A during its operation,including their financial risk identification,evaluation,and cause analysis,and makes recommendations on the prevention of financial risks for Bank A and for small and medium-sized commercial banks as a whole.Based on the above background,this paper draws on the research results of financial risk of small and medium-sized commercial banks at home and abroad,takes the principal-agent theory,information asymmetry theory and comprehensive risk management theory as the basis,firstly analyzes the current situation of Bank A’s operation,combines the financial information disclosed by the bank in recent years,and takes into account the actual situation of Bank A.The financial risk evaluation system of Bank A is established from five aspects:liquidity,capital adequacy,asset quality,profitability and management level.In constructing the model,we selected thirteen representative indicators because the qualitative indicators were difficult to quantify,and applied the entropy weighting method to give the corresponding evaluation weights to the selected financial indicators.Secondly,the financial risk level of Bank A from 2017 to 2021 was calculated by using the TOPSIS method to construct positive and negative ideal solutions,and the level was ranked,and it was found that the financial risk of Bank A showed an upward trend in the last five years.Finally,we analyzed the causes of Bank A’s financial risk based on the model evaluation results,and found that the poor level of risk management,the single way of profitability,and the more difficult replenishment of capital are the intrinsic motives of Bank A’s rising financial risk.In addition to identifying the financial risk of Bank A using financial data,this paper also analyzes the external factors that affect the increase of its financial risk,and finds that the continued downturn of loan credit enterprises,the intensification of inter-industry competition,and the low quality of target customer groups all affect the financial risk of small and medium-sized commercial banks.Based on the above research,this paper proposes recommendations to prevent the financial risks of small and medium-sized commercial banks from two aspects:internal and external factors.To address the influence of internal factors,Bank A should control risks in the whole process,actively develop diversified businesses,and broaden capital replenishment channels;to address the influence of external factors,Bank A should actively respond to the transformation of credit-granting enterprises,improve comprehensive development capacity,and face the downward pressure of large banks to ensure the safe and stable development of small and medium-sized commercial banks.