Research On The Safety-control Of The Credit Assets Of Chinese Commercial Banks

Quoted from Deng xiaoping "The finance, the fundamental for all other things, is crucial for economic development."On the other hand, it is also the core of the high-risky banking industry. It is directly related to national economic, financial security, and even national securities. Due to the fact that the financial crisis will first be reflected in banking industry and failure of the banking operations will also trigger the crisis, Commercial banks, the main core of the banking industry, play an important role in economic and social developments. As pointed out the famous economist Wu jinlian: Among the weakness of our nation's financial infrastructure, the weakest part is the banking system, because of the large proportion of the non-performing credit assets. The task to commercial banks' credit assets risk management has become more and more difficult as the globalization of the international economic and finance. Recently, national economic and financial infrastructures have been devastated by the international financial situation, such as financial crisis in Mexico, Asia, and Albania as well as the Bankruptcy of Bnp_paridase Bank. These crises alerted the world to realize the importance of a healthy commercial banking system to economic development and financial securities. On the other hand, the current operation mode of commercial banks is still supported by the profits from the difference between the cost of taking deposits and the benefits from lending the loans. Therefore, the main financial risks of the commercial banks are equivalent to the risks of credit assets. By Jan 1st, 2007, the banking market would be fully opened to international competition to which the commercial banks are exposed. As a result, the inflow of the international financial crisis calls for even higher requirement for commercial banks credit assets risk management. Thus, it is imperative to find a tactical control method, which fits for our national situation, for credit risks by analyzing the cause and source of them.On the other hand, due to the fact that the research and supervision of the credit assets security have been ignored for a long period of time, which is the product of the planed-economic, the security measures are most out-of-dated. With the development of the market economic, although there were some improvements for the risk management, they are , however, still not well-developed in the methods and policies due to some factors such as economic transformation, under-developed financial market, incapability of efficient risk management and control, and the incomprehensiveness of the legislation. Phenomenon includes ill-proportional of non-performing credit assets and inefficient of collection policy. According to the 5-rank classification policy, the ratio of non-performing credit assets is 23%, 17.8%, 14.1%, and 10.2% for 2002, 2003, 2004, and 2005, respectively. The unavoidable consequences of the latter phenomenon are severe operation losses and the insufficient capital, which is far less than the 8%, the standard set by Basel n. All of those indicated the insufficiency and incapability of the credit risk assets management and supervision, which, in turn, jeopardizes the commercial banks' credit assets and induces huge volume of non-performing assets, Such as "Lantian Co.,ltd", "Tuopu group", "Delong group", "Puma group" event,and so on.The purpose of this work, based on the analysis and evaluation of theory of the international banking assets security, is to define and classify the security of the banking assets by assessing cause and current status of the commercial banks' credit risks. Cross-section studies such as current status of China's banking industry, info-economics, financial behavior, corporate ownership, corporate control system, financing, and internal control have been used to investigate the effects of behaviors of the corporate financing, commercial banks, government, as well as the social credit environment on credit assets, especially the interaction between asymmetric information and credit assets. Aided by statistics software SAS and statistical methods including Logistic regression, principle component analysis, factor analysis, and multivariate analysis, empirical research has been fulfilled to model the commercial credit risk classification system, base on which conclusion has been reached about the ways to improve the risk management. The conclusion established some ways to improve the credit risk management such as optimize the national-owned enterprises and commercial banks operation structure; establish new relationship between banks and corporations; optimize bank's internal control system; balancing corporate financing ways, eliminate corporate over-dependency on bank's credit assets, and remove information asymmetric contributed by credit sales. All the methods provide better ways to indentify and control the credit risk, which is stabilize the banking industry and financial market. Academically speaking, this study also could contribute the financial management theory and the commercial banking.There are totally 8 chapters in this dissertation. Chapter one is the introduction. Chapter two is the definition, classification of the international and national current status the commercial credit assets security. Chapter 3 is the analysis the cause of commercial credit assets security. Chapter 4 is the analysis of the national commercial credit assets security management and current situation. Chapter 5 is the forming mechanism of commercial credit assets security. Chapter 6 is commercial credit assets security and information asymmetric. Chapter 7 provides an empirical statistical model. Chapter 8 is the evaluation commercial credit assets security policies.Conclusions include:1. The fundamental difference between the capital security and duel-security of the capital and the interest, the latter of which is the main idea of the commercial credit assets security.2. Chinese-special, as well as the common risk sources, has effects on credit assets security of banking industry. Under the transformation of the economic infra-structure, commercial credit operation is effected by behaviors of corporates, commercial banks, government, social agencies. Due to the information asymmetric, the behaviors are even more important in analyzing of credit assets security.3. Logistic regression analysis, principle component analysis, factor analysis, and multivariate statistics have been used in paper to build a commercial banks' credit assets classification model. The model is very useful in filtering the financing corporate, and therefore, improving the lending decision. As a result, the ability to avoid and mange credit risks is enhanced.Based on the sources of the credit risks, this study provides effective and efficient methods to increase the ability to control and manage them. Special efforts have been concentrated on the problem of information asymmetric which is encountered by the daily business operation, methods to deal with which include the establishment of the corporate, as well as personal, information system in a national scope, institution of information department serving as a information-spy, information exchanging platform among government supervisory agencies, restructuring of commercial banks, optimization of information sharing channels, techniques upgrading, enhancement of information identification ability, and reduction of information asymmetric situation.With the process of opening of financial markets after rejoin the WTO and globalization of international economic and financial market, Chinese commercial banks encounter competition with increasing magnitude. As a result, it is crucial for financial academic society and the banking industry to find methods to manage and control the commercial banks' credit risk which is suitable for China's special interests. Therefore, to follow the international banking development trends, commercial banks should definitely fulfill the reformation of ownership, restructure corporate, constantly optimize internal control system, enhance information sharing, and establish solid relationship between corporate, government, social agencies, supervision department, and all other external entities in a way to improve credit record system, banking supervision, ability to credit risk management such that favorite China's commercial bank's competition situation could be reached. This was what my study is aimed at.