Based On The Theories And Methods Of Bank Micro-credit Risk Management Study

Risk management is a key concept and lasting topic for the operation and management of commercial banks. This article focuses on the credit risk control in commercial banks. Through definition and classification of credit risks faced by commercial banks, systematic analysis of risk recognition, risk measurement, risk decision-making and monitoring, and employing both qualitative and quantitative analysis methods, this article aims to develop practical theory and methods to guide the credit control practice in China's banks.As foreword of this article, the first chapter states the background and reasons for the author to choose the topic of this article, as well as the objective, contents and methods of his study. The second chapter introduces the current studies on banking risk control both at home and abroad. Based on micro-level credit risks, the third chapter begins with the definition and function of modern commercial banks, presents the author's insight into bank credits and credit risks and points out that the core part of financial risks is credit risks or default risks. Instead of an extensive discussion of interest risks, exchange risks, market risks, liquidity risks, political and social risks in banking practice, it lays the emphasis on micro-level credit risks and seeks unity in the definitions for terms such as 'credit' and 'loan', 'borrower' and 'enterprise', 'lender' and 'bank', thereby avoiding incoherence and misunderstanding. At the end of the third chapter, the author puts forward his opinion on credit risk management, i.e., credit risk management is a subject both of technology and of art.The fourth chapter systematically classifies the different ways at home and abroad to assess bank credit risks and enterprise credit risks. The first section of this chapter introduces several traditional but practical analytical methods, such as the most frequently used methods of 5C, 5P and 5W, and the LAPP Method, the SWOT Method, as well as the Four Elements Method which is popular in China, i.e., Financial Analysis, Cash Flow Analysis, Non-financial Elements Analysis and Guarantee Analysis. The second section of this chapter introduces the credit rating methods for the assessment of commercial credit. The third section refers to two rating methods, namely,Zeta Method and CART Method.The fifth chapter focuses on the international quantitative analytical methods for assessing credit risks. By comparing and analyzing major quantitative models, it demonstrates the application range of the quantitative methods, presents the economic explanations of the mathematical models and estimates the practical value of quantitative methods to credit risk management. The first section of this chapter analyzes the development history and current status of quantitative analysis models. The second section classifies the quantitative analysis models. The third section introduces several latest models, and specifically compares several internal risk analytical models recommended by the new BASEL Agreement, such as the Credit Metrics Model by JP Morgan Chase Bank, the KMV Model by KMV Corporation, the Risk Metrics+ Model (also called CSFP Model) designed by the Credit Suisse Bank, the CreditPortfolio View Model designed by Mckinsey & Company and the RAROC Model presented by Bankers Trust Company. In the end, this chapter discusses the application of quantitative models. Although the development of information technology enhances the accuracy of quantitative models, according to the author, they only act as the supporting technique for decision-making and not as substitute for decision-making, no matter how accurate they are. At present, the application of above-mentioned models are still immature for commercial banks in China, but the use of quantitative methods will be the trend for credit risk control. After China's entry into the World Trade Organization, the competition and cooperation with foreign banks will make it necessary for banks in China to employ quantitative methods. Moreover, with the implementation...