Research On China's Commercial Banks Consumer Credit Operating Mechanism

As an important financial service practice, Consumer credit originated from the profit motive of financial institutions and consumer's seeking to maximize the utility. From the late 1990s, our economy gradually change from "shortage" to the "surplus", entering the stage of demand constraints, the insufficient of effective demand becomes a trammel for economic to further development; With the development of economy and the growth of people's incoming, the consumer demand has been expanded and the consumption structure has been changed. These have objectively produced an urgent demand on the development of consumer credit. It can be said that consumer credit has been taken as policy instruments in China to expand domestic demand, stimulate the consumption, and ultimately raise the consumption rate. So it has strong policy-driven feature. The operation of China's consumer credit is the forcing result of external environment. Since Commercial banks are the main departments for the operation of China's consumer credit business. Therefore, the research of consumer credit operation primarily should be based on commercial banks.The consumer credit operation of China's commercial banks is built on the basis of consumer credit demands, supply and the economic growth effect of consumer credit and such relevant theories. Consumer demand for credit is a kind of demands, including the total demand and the structure demand. Total consumer credit demand is mainly affected by the people expectation, while demand structure is more constrained by other factors. When people have potential consumer demand, facing liquidity constraints, then consumer credit demand will be produced to ease the demand for liquidity constraints. Consumer credit supply is depended on the bank's business management philosophy and level, it maybe explained by the micro-supply principle. Consumer credit effect to the economic growth is mainly manifested in two aspects: First, consumer credit stimulates consumption and through the increase of consumption and the multiplier effect of consumption to promote economic growth; Second, the function of consumption is the reproduction of labor and the investment to human capital, consumer credit makes consumption be achieved ahead of schedule, and helps to improve the current investment in human capital, so as to achieve a higher economic growth rate.The operation of commercial banks Consumer Credit in china has its own characteristics and development law. It is closely related to the change of macro-economic environment in China. After the high-speed growth for nearly 10 years, the extensive amount of market expansion and the accumulation have been initially finished, it is inevitably to enter into a deepen development stage whose feature is intensive operation. Facing increasingly intensive competitive pressures in the Consumer credit markets, in order to accomplish this fundamental transition, the key lies in how to effectively break the system bottleneck which currently hinder the deepen development of consumer credit business so as to establish consumer credit operation mechanism which is suitable to the development characteristics of China's consumer credit. They include consumer credit business marketing operational mechanisms and innovative mechanisms, Consumer credit business pricing mechanism and performance evaluation mechanism, and Consumer credit business credit evaluation mechanisms and risk management mechanism.Establishing a consumer credit business marketing mechanism is the requirements for commercial bank to expand the scale of consumer credit and improve the operational effectiveness .On one hand, if commercial banks operate consumer credit business marketing mechanisms effectively, more consumers will accept and purchase the consumer credit services, and commercial banks will achieve the expansion of consumer credit on the scale; On the other hand, commercial banks operate consumer credit marketing mechanisms effectively, pushing innovative consumer credit business to the vast number of consumers, so that more types of consumer credit business are accepted by consumers, then realize the expansion of consumer credit on the depth . Consumer credit marketing services belongs to the areas of marketing, the core of which is that banks bring about mutually beneficial exchange through achieving customer's satisfaction and loyalty, try to establish long-term service relationship, and ultimately form a stable source of profits and realize its long-term development. Commercial banks should strengthen the marketing team-building and marketing tool design according to their own direction and the business environment, clear market segmentation and positioning, determine operating in the general planning of their own consumer credit business, take targeted marketing strategy, and provide consumers with personalized consumer credit services in order to obtain the best marketing results.It is necessary for commercial banks to establish a scientific evaluation mechanism to raise consumer credit business operating efficiency. Commercial banks should build up a set of systematic and Scientific Performance evaluation System, combining scientific and operational principles, making maximizing profits as the core based on "three Features", and reflecting the growth of consumer credit business, and; According to the characteristics and nature of indicators, based on the their handling of dimensionless, establish a rational model based on achievement score, and with which to evaluate the operating efficiency of consumer credit business of commercial banks and the performance of Operators, and lead commercial banks consumer credit business to enhance profitability. Operators should adhere to the principle of combining short-term goals to long-term development strategy; AS to the performance evaluation of consumer credit, it is necessary to reflect consumer credit in the short-term business objectives and long-term development strategy to ensure stable development of consumer credit toward the expected direction.To establish a rational pricing mechanism of consumer credit business is the important precondition for commercial banks to effectively improve consumer credit business profitability and reasonably compensate the consumer credit business risks. Consumer loan Pricing is a system engineering operated in the dynamic environment, which is through establishing rational pricing mechanism to scientific pricing on the consumer credit business, to realize consumer credit business risk coverage and digestion, and therefore achieve the balance between competitiveness in the market and business profitability. Judging from actual situation of China's commercial banks to develop the consumer credit business, we can make two choices: One, based on the credit rating, using historical data accumulated by China's commercial banks in the long-term business of credit, and Credit Transfer Matrix between different grades, built a model of consumer loans, through scientific pricing to achieve the matching of risks to benefits. Second, introduce the modern option pricing in the capital market theory to the pricing of consumer loans, giving full consideration to the quantitative relationship between consumer lending rates, mortgage rates and the probability of default, thus establish loan pricing model to solute the problem of risk compensation more reasonably in the pricing consumer loans.Establishing and improving evaluation mechanism of consumer credit business is the basic work for the prevention of the consumer credit business risks and protecting the safety of consumer credit funds. It is necessary to make a scientific evaluation to consumer credit situation, and make a reasonable decision-making on consumer credit business. In fact, due to the asymmetry of information access, when the commercial banks operate in the consumer credit business, it is easy to produce adverse selection and moral hazard problems. Through floating rate Game model ,we can analysis the impact of asymmetric information to the consumer credit market operation mechanism and operation efficiency objectively ; Through the effective operation to the evaluation mechanism of consumer credit business, we can analyze record of consumer credit,credit capacity and credit risk comprehensively, get a scientific evaluation of consumer credit. Based on this, we can decide whether to provide consumers with consumer credit services and in which way and what additional conditions to provide consumers with consumer credit services, to protect consumer credit business security.Establishing of sensitive consumer credit business risk management mechanism is a strategic choice for the sound operation of China's commercial banks. Consumer credit risk management is the core of consumer credit business operation and management. Its contents include risk factors identification and risk signal acquisition, the risk of early warning, risk prevention and control and so on. Consumer credit risk exposure have a certain delay, risk change process has obvious short-term characteristics, therefore, strengthening risk awareness, improving risk management skills, scientific quantitative credit risk and effective control of credit risk, and establishing long-term consumer credit risk management mechanism has become the urgent task which China's Commercial Banks face. Through the use of VAR methods and the establishment of expected model to measure consumer credit risk losses and the calculation of the non-willingness default probability of consumer credit business, we can achieve the object of effectively controlling risk.Establishing and improving the consumer credit business innovation mechanism is a key link for commercial bank to achieve the rapid expansion of the scale of consumer credit business and "faster and better development". On one hand, a perfect consumer credit business innovation mechanism is the request for the commercial bank to participate in competition in the consumer credit market and realize expansion of the business scale; On the other hand, a perfect consumer credit business innovation mechanism is the request for the commercial bank's consumer credit expansion in emerging market. All in all, it is necessary to take full advantage of modern information technology to optimize institutional arrangements and strengthen the relation between Banks and Insurance companies to truly realize consumer credit product research, business processes, operational modalities and other innovations.