Study Of The Criterion Of Risk-based Loan Classification

The reformation of commercial banks in China has gone to a critical stage. An important and difficult problem is the problem of non-performing loan. The non-performing loan comes into being because of various reasons and one of the important reasons is the defect in risk-based loan classification systemThis thesis discusses the practice of risk-based loan classification at present in our country .It sets the Industrial and Commercial Bank of China as an example and studies the structure, the managerial responsibility, the way and criterion of classification, the process of classification and the source of information in ICBC. It also provides a detailed discussion of the main problems of the risk-based loan classification at the moment, which has caused debate, and the latest results in relative research. Combined with the research, the paper comes to the conclusion that the key problems in risk-based loan classification lie in the following aspects: too subjective, not complete in structure and not systematic enough etc.Financial management theory and Management are employed in the introduction of a specific program which can improve the loan classification system currently in effect, that is, to build a risk-based loan classification evaluation system. This system firstly sets the current financial data of the borrower as the starting point and mainly uses quantitative analysis to make an initial judgement of the borrower's loan on the day of balance sheet. Secondly it makes a qualitative analysis of the non-financial elements that influences the borrower's future financial situation on base of non-financial elements analysis in order to predict any change in the borrower's future paying possibility for the borrower to pay his debt in completeness. This system can also be applied in correcting the classification of the borrower's borrower's daily loan in the balance sheet loan on the day of balance sheet,and forms the result of the borrower's loan classification .Lastly it leads to the final loan classification through the qualitative evaluation of the guarantee and through the verification of special regulations.In the thesis the evaluation system is used to classify the loan of ShiLian Casing limited Company and the loan of DiLi Joint-stock Company. Its usability is thus proved.Quantitative analysis and qualitative analysis are combined together in this thesis and the paper is a trial in forecasting the future paying possibility on the present loan condition. The paper is beneficial in operation of risk-based loan classification and in the improvement of the risk-based loan classification criterion system .