| We can’t neglect the monetary and credit support for agriculture when we research the issues of Chinese agriculture. And when we research rural fiance, we also can’t neglect the China Rural Credit Cooperatives which took more than 80% of total rural credits. The China Rural Credit Cooperatives (hereinafter referred to as "rural credit cooperatives," or "RCC"), are the monetary undertakers of the socialism new countryside construction, and the promoters of the county’s economic. Without the driving force of monetary, the cycle "simple reproduction-expanded reproduction" of the Chinese agriculture will to some extent be blocked, or even loss the sustainable development ability, and induce food production crisis.Although the rural credit coverage for the RCCs was only 31% statistically, accounting for 220 million farmers, the agricluture, as the background of national economy, would lose monetary guideline and induce big problems if there is no the 31% basic credit. At the same time, the healthy development of the RCCs is the key to protect rural credit supply. Therefore, the chief issue for keeping efficient functioning of the RCCs and improving the efficiency of rurual credit is to prevent the credit risk effectively. For the purpose of combating the risk of rural credit cooperatives, this paper will dissect the risks by putting them into the logical franmework which includes identification, early warning and monitoring, evaluation, control and prevention. Through the logical analysis and drawing on international experiences, the author want to try to build a risk prevention system of rural credit cooperatives in China. So that it can promote the RCCs to run healthily, and play a greater role of the main force of rural finance.According to the themes and research purposes, this paper is divided into eight chapters:the first is the introduction; The second chapter describes the content of the risk of the RCCs, and its profile and causes; The third chapter discusses the classification and identification of the risk of the RCCs; In the fourth and fifth chapters, the author will build the financial risk assessment and early warning monitoring system of the RCCs by referring to the experiences of developing countries and regionals; The sixth chapter is about risk assessment and case studies; Chapter seven is about how to structure the risk control systom of the RCCs; In Chapter ehght, the author proposes countermesures and suggestions of how to prevent risks of the RCCs. The specific content and main points are as follows:(1) After a series of different managementand development stages, particularly the new reform which took clearing property rights and improving the management system as its centers, the RCCs have made a significant improvement on the risk condition. However, there are also some new peoblems such as low efficience of risk management, lagging construction of risk management information system and risk control system. The main current causese of the RCC risks are that the management system and operating system are unsmooth, credit technology and credit system are defect, the design of risk positions and the construction of risk culture is lagging, and the targets of operating service are vulnerable.(2) The first thing to identify financial risks is to correctly determine the type of a financial risk. We can make categories from four aspects, that can be sources of risks, risk elements, risk status, and the level of risks. The purpose of risk identification is to determine risk types and accurately find risk sources, then implement risk measurement to help select the best risk treatment programs. The basic path of risk identification of the RCCs comes form its transmission mechanisms. Through risk transmission mechanisms we can understand how risk factors incent and process risks,and therefore find the roots of risk. The risk identification mechanism of the RCCs is constituted by four parts, they are risk early warning aims, risk analysis standards, early warning signals and the middle risk control process.(3) Through the analysis of financial risk early warning monitoring systems of the developed countries and regions, the author deems that although there are some differences among the national and regional early warning and monitoring systems, these differences are mainly based on their local cultures and different economic systems. In essence, these early warning systems have basically similar operating mechanism. They are all based on financial statements and other relative informations which comes form financial institutions, and all recur to various financial ratios to determine the financial risks and early warning. Through the comparative analysis of financial risk management of Rural credit cooperative organizations in the developed countries, the author deems that it is important to handle the relationship between government intervention and the self-management of financial institutions or organizations, which is based on market informations.(4) Because of the particularity of the RCC risks, it should be based on supervision indices of commercial banks and refer to rules of "The New Basel Capital Accord" to establish a rural financial monitoring mechanism with Chinese characteristics, and a scientific and impersonal Index evaluation system for early warning. At present, the RCC risk assessment is mainly based on "The risk assessment and early warning indicator system of rural cooperative financial institutions, (Trial)",which was formulated and promulated by China Banking Regulatory Commission in January 2004. The early warning indicator system Includes five categories of quantitative indicators-indicators of capital adequacy ratio, liquidity index, safety index, efficiency index, comprehensive development capacity. These indices are main used to evaluate rural cooperative financial institutions about their level of corporate governance structure, the ablilty of risk management, and the truthfulness, integrity of their ralative statements. The main pueposes of improving the index sysytem are to establish a more comprehansive index system that includes capital adequacy risk, credit risk, liquidity risk, earnings risk, market risk, operational risk, market risk and so on, to re-allocate operating resources so that revenue targets and risk management objectives can organicly integrate.(5) Risk assessment is the primary mean of risk regulation. The general risk assessment of the RCCs mainly analyzes the core micro indicators which reflec the stability of the financial system. It includes analysis of capital adequacy, asset quality indicators of risk analysis, risk indicators of profitability, liquidity risk index analysis, and asset liability management comprehensive analysis of risk indicators. As the business development and competition, the risks of the RCCs have also shown a complex and changing characteristics. To identify, measure, monitor, and adopt some scientific means to control risks is the primary way to keep the RCCs running normally, and to realize "security, liquidity, profitability". This article also made a case study with the 2007materals of the Xinzheng City Rural Credit Cooperatives Union in Henan Province, which takes 16 rural credit cooperatives under its jurisdiction.(6) The risk prevention enlightments of "The New Basel Capital Accord" for the RCCs are to right determine the capital adequacy and its added channels, to correct abnormal conditions of th e non-performing assets, and to establish risk early warning systems. There must be three parts to construct China’s rural credit cooperative framework for the risk prevention system. First, to introduce risk management mechanisms, including reshaping the corporate governance structure, correcting the relationship with the government’s macro-mentorings, building national association coordination mechanisms, and reducing the loss of rural credit resources caused by transitional regulation; Second, to establish institutional arrangements risk arrangements, including consolidating the basis of statistical data, designing risk forecasting and warning indicator system, introducing monitoring mechanisms VaR model, establishing a risk rapid correction machine, and a effective internal control system; Third, to build a risk reporting mechanisms, including rationalizing the path of risk reporting, clearing the risk reporting responsibilities and standardizing the content of risk assessment report.(7) It will be a long-term system work for the rural credit risk prevention. We must based on the reality, put strict management and innovation, so that we can form a series of efficient management measures.First, we should improve the external environment of the RCC risk, including adjusting the credit strategy, reshaping the credit risk management culture; establishing a sound risk compensation mechanisms;innovating education and training and improving the professional quality of staff; improving credit policies and innovating credit products. Second, we should improve and perfect the internal control system of the RCCs, including to improve the internal control structure and to weave supervision network; to put more control on key links so that it can prevent operational risk; to standardize credit management and establish risk management mechanisms; to establish an accountability system and improve internal control mechanisms. Third, we should establish and improve the risk prevention and counter mechanisms.Including raising the forecast level of risk identification, improving credit risk early warning mechanism; establishing risk prevention mechanism, enhancing the level of risk prevention; establishing a risk compete mechanism so that it can enhance the anti-risk ability for loans. |
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