A Study Of The Commercial Bank Credit Risk Prevention Under Macroeconomic Uncertainty

In recent years, the problem of credit risk management in the business process of banking has become the common concern of theoretical workers, practical operation worker and supervisors in both home and abroad. Banking is dominant in the financial system in China. Credit business is the most important business in our commercial bank and become the main source of revenue of banks. Accordingly, the primary risk that commercial banks are facing is credit risk, which has become a quite important uncertain factor in the business process of banking. In the era of economic globalization, the banking which has been completely opened up in China is facing complicated external business environment. The precaution level of credit risk in banking is meeting with more severe challenge both theoretically and practically.Nowadays, Chinese economy is rocketing and the GDP in2010took the second place in the world and has become the second largest economic power. With the development of our economy and the deepening degree of opening up and the influence of economic situation worldwide, the uncertainty of macro-economy is strengthening. In the post crisis era, the uncertainty resulted from the financial crisis continues to increase, such as the price rise of international commodity, trade friction strengthening, the vibration of interest rate and exchange rate. Commercial banks are facing new challenges owing to the uncertainty of economic development. In order to hold advantage in competition and maintain the market share, Chinese commercial banks need to improve management styles, especially improving the ability of risk prevention, reducing non-perfoming assets and keeping appropriate safety and mobility. In terms of theory, the research of commercial banks’credit crisis precaution from the angle of macro-economic uncertainty is not so many, and the empirical research seems rare. In terms of practice, the quantitative technique of the credit risk in banking needs to be strengthened ugently and the risk prevention level improved. Therefore, it is an essential subject to do research on the macro and micro factors affecting credit risks, strengthen credit risk prevention and maintain the financial stability, which has important theoretical and practical significance.The purpose of this essay is to expound and prove the causal relationship between macro-economic uncertainty and the credit risk of commercial banks and the risk transmission mechanism. On the one hand, it researches on the performance and characteristics of credit risk under the condition of the macro-economic uncertainty and how the commercial banks prevents credit risk by perfecting systems. On the other hand, it also does some research on how to increase the effectiveness of macro control through improving systems. And therefore it can provide basis for reducing the uncertainty of macro-economy by means of improving systems, which will offer theoretical basis and technical support. It will provide valuable research results for guiding the rational allocation of credit resources and increasing the effectiveness of macro-economic policies.Following the basic research thought "theoretical analysisâ†'empirical testâ†'countermeasures and suggestions", this essay adopts the method of combining theoretical analysis and empirical test and researches on credit risk prevention from a brand new angle---the uncertainty of macro-economy. The main research contents include the effects of economic uncertainty on credit risk, transmission mechanism and precautions and countermeasures. It consists of the following four parts:The first part, that is the first chapter, introduces the writing background. It applies the historical analysis method to review and comb theoretical and empirical research literatures on economic uncertainty and credit risks at home and abroad. It illustrates the main existing views and makes some comments and states the research significance, methods and frames.The second part (chapter2&chapter3) studies the relevant theory on economic uncertainty and credit risks. This part analyzes the economic uncertainty and its origin, summarizes the characteristics of macro-economic uncertainty, states the definition of credit risk and its theoretical basis, make analysis on transmission mechanism of credit risk resulted from economic uncertainty and finally analyzes in detail the present situation and causes of credit risk in China. The third part (including chapter fourth), study macroscopical economy under the condition of uncertainty of commercial bank credit asset allocation and risk management. The first part introduced the commercial bank asset allocation theory has experienced the development of asset management, debt management theory and the assets and liabilities management in three stages, and then on the management of credit assets of commercial banks and risk control are analyzed; then to our country commercial bank credit asset allocation and management situation analysis; finally, analysed me commercial bank credit management characteristics and defects.The fourth part (including Chapter5) focuses on the following empirical research. Firstly, it constructs a framework of the optimal allocation of the banking assets under uncertain conditions and draws two conclusions to test:1.With the increase of the macro economic uncertainty, the section distribution variance of the bank loan/assets ratio will narrow. When the degree of heterogeneity increases, the section distribution variance of the bank loan/assets ratio will enlarge.2. Through building GARCH model, it makes time series data of industrial growth rate the proxy variable of macro economic uncertainty and paves the way for the further study of quantitative analysis.3. It provides empirical analysis of the relationship between macro economic uncertainty and the bank credit asset allocation, i.e., construct a model of portfolio to demonstrate the relationship between macro economic uncertainty and portfolios. Then it analyzes the relationship between the macro economic uncertainty and portfolios, based on the panel data (1995-2011) of14commercial banks in our country, by econometric model to verify the truths of the relevant conclusions.The fifth part (including Chapter6) puts forward countermeasures based on the above theoretical analysis to the conclusion of the empirical research. It offers suggestions on the following aspects:to pay attention to the analysis on credit risk in commercial bank under uncertain macro economic condition; to perfect the internal control system of banking credit in our country; to improve the efficiency of industry credit allocation under uncertain macro economic condition; to use credit risk-dispersing instruments to set up early warning mechanism of banking credit risk; to strengthen external supervision to the management of credit risk in commercial banks; to strengthen precautions of the small and medium-sized enterprises under uncertain macro economic situation.Through theoretical analysis and empirical study of the impact of the credit risk of commercial banks on macroeconomic uncertainty, this paper mainly gets the following conclusion:1. Macroeconomic uncertainty has an important impact on the decision of China’s commercial banks credit asset allocation. When this uncertainty increases, the bank loan/asset ratio of cross-section distribution of variance reduces, and "herding effect" occurs. The concentration of loans increases and the stronger noise signal is received on loans and the expected return, leading to a more homogeneous bank act compared with that at the stable phase. The uncertainty of the heterogeneity has a significant effect. When the gains are harder to predict for a specific project loans, the banks possessing more information doesn’t have more competitive advantage than those having less information, which indicates that the market-oriented reforms of China’s commercial banks is expected to be performed in depth.2. From the macro level, the asset structure of the external environment needs to be improved to optimize and the research and monitoring of domestic and international macroeconomic and industry dynamics analysis need to be strengthened, so the macroeconomic trends and the development of the industry will be judged correctly; the commercial bank’s risk measurement model needs to be further optimize, the macroeconomic factors needs to be fit into the risk control and the quantified risk measurement model.3. From the micro level, the structure of assets can be adjusted to optimize the asset allocation from the stock and increment aspects from the point of view of commercial banks. On the one hand, the stock adjustment is to adjust the structure of the balance of existing assets, maintaining the same asset size. So commercial banks need to enhance the ability of the grasp of macroeconomic uncertainty, making good long-term plan in order to optimize the banking assets structure. On the other hand, incremental adjustments to the increase assets of the commercial bank are practical and effective measurement of asset restructuring. To be specific, first, the duration of the loan structure should be optimized. In general, the longer the loan period is, the slower the turnover rate is, and the worse the mobility is, the more risk of uncertainty of the macroeconomic is. Second, the loans structure should be optimized, including the region, the industry and the department to invest in the structure, focusing on structural subdivision, following the principle of diversification. Third, the loan assets should be reduced and the proportion of non-loan assets should be increased, including the proportion of the bonds, investment, real estate, foreign currency assets and other assets.Confined to the research capacity and information as well as practical constraints, this thesis is expected to make more in-depth discussions such as macroeconomic uncertainty and the use of the default rate data to measure the credit risk of banks.