China's Financial Leasing Risk Management Study

Nowadays, like the other financial organizations, there are two things for financial leasing companies to do: (1) offering clients the financial products and services; (2) embarking upon financial medium and managing risks. And the risk management of financial leasing has become more and more important for financial leasing companies to improve their ability of making profit and competition. The practice of financial leasing industry of China has proved that the level of risk management is the key to measure the capacity of continuous operation of financial leasing companies. Based on the characteristics of financial leasing risk, this paper maked a metric and positive study on the whole risk of financial leasing companies and the three main risks of separate leasing company, i.e., credit risk, interest rate risk and operation risk. In the end, this paper put forward four countermeasures of how to keep the risk away and control it, i.e. to strengthen the function of the administrative commission of financial leasing risk, to make use of the risk modes to manage the risk, to design and take advantage of the financial leasing risk warning system to keep the risk away, and to manage the operation risk of financial leasing. Meanwhile, it probed into three measures to diversify and transfer the risk, which is to innovate the financial leasing products, the diversification and securitization strategies of financial leasing assets.Compared with the financial risk of other organizations, leasing risk has its own particularity, so in the preface the paper made clear the characteristics of financial leasing risk from the very beginning: (1) diversification of risks; (2) having its particularity in credit risk, interest rate risk, operational risk and liquidity risk; (3) difficult to share the advantages of diversification; (4) highly related with industry cycles and business cycles.Therefore, based on the characteristics of financial leasing risk (from the lessor), the paper firstly classified the risks and made respective studies of how to measure and manage the three of the most important risks in financial leasing operations: credit risk, interest rate risk and operational risk. Finally, this paper probed into a series of measures to strengthen the risk management of financial leasing company.This paper emphasized on the study of credit and interest rate risk of financial leasing, mainly concentrated on its metric and positive aspects, and also discussed the applicability ofthe modern metric mode of risk in our country. The paper attempted to manifest the financial leasing risk by means of management models and information from our financial leasing companies. By the conclusion of positive study using Logistic Model, the credit risk discriminant of domestic financial leasing is gained, and we can use this template to progress our risk management. Moreover, the paper used the "VaR" method to evaluate the credit risk and interest rate risk in financial leasing, and then pointed out the VaR can be used in security investments in China's financial leasing companies firstly. In addition, the metric method of the operational risk and its application in our financial leasing industry were analyzed, and several useful opinions about how to manage operational risk were raised.This paper advanced the measures to strengthen the financial leasing risk management from two aspects. On the one hand, it put forward the measures of how to keep the risk away and control it from the aspect of the organizational guarantee of risk management, risk warning system, the control of the operation risk and the risk transfer(diversification and securitization), with the consideration that the strong function of the administrative commission of financial leasing risk is the guarantee of risk management, the risk warning system can keep the risk away in time, the application of the modern metric mode of risk will improve the level of risk management of financial leasing company ,and the control of internal risk will benefit from the management of operat...