The Causes And Prevention Of Credit Risk For Commercial Bank Under Information Asymmetry

An ancient Chinese saying tells that knowing each side will make you become a permanent winner. Numerous facts have proved the truth. In the modern time, it is very essential for every business sectors to select and analyze information in order to be a winner. Many people has been lost much due to incomplete information they have. Back in the 1997 when the Asian financial crisis out broke, many financial institutions bankrupted at the result of poor information which might be important for the creation of the strategy to prevent the crisis. On the other hand, A wolf from a North America, so called Man Striding Ahead of the Stock Curve, tell the world a lesson: People who earn most are those who know most. The Nobel Prize of Economics has twice given the honor to economics who showed interests and got high achievements in the field of Informatics. Information has been becoming of more importance for modern financial institution to survive and develop in the environment of increasing uncertainty.Commercial bank, like many other financial institutions, is in the face of lots of risks in which credit risk is the biggest hazard. This article gives a complete and systemic analysis of the creation, representation and prevention of the credit risk from the point of view of Informatics. A mathematic model has demonstrated the cause of the credit view with theoretical and empirical suggestions of prevention followed. In the final part, nine measures are listed in forms of concrete methods to terminate the credit risk.