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Study On Foreign Currency Loan Pricing Of Chinese Commercial Bank

Posted on:2005-02-08Degree:MasterType:Thesis
Country:ChinaCandidate:Z LvFull Text:PDF
GTID:2156360152467771Subject:Business Administration
Abstract/Summary:PDF Full Text Request
Loan plays an important role in the commercial bank, the method and mechanism of loan pricing not only affect bank's income but also its asset quality and customer structure. If loan price is over high, bank will lose customer in the competition though its expected income will be higher. If loan price is over low, the loan revenue cannot compensate loss by default and operation cost. In recent years, especially with the quick step of market–oriented interest rate reform, the problem of loan pricing has been researched more by commercial banks. However, renminbi loan pricing is allowed to float within the range regulated by the central bank and loan can not be priced independently. Meanwhile, interest rate of foreign currency was entirely opened on Sept. in 2000; loan pricing of foreign currency has been changed from chaos to order gradually. Also, the way and technique of foreign currency loan pricing are improved gradually. This paper will discuss commercial bank foreign currency loan pricing in china with the reference of western commercial loan pricing models, combined with present situation of banks in china.This paper introduces the course of china's market-oriented interest rate reform and its effect to foreign currency business. By taking BOC' s experiences as example, it analyses the trend of foreign loan interest rate since foreign currency interest rate could be decided according to market. Chapter 3 expounds principle of foreign currency loan pricing and factors which influence foreign currency loan pricing. Characteristics of traditional loan pricing models of western commercial bank are analyzed in the chapter 4. Risk premium and relationship between bank and customer in the foreign currency loan pricing are discussed in chapter 5 to chapter 7. The method to determine risk premium with credit grading system and loan risk evaluating system of our country is proposed. Furthermore, the premium of relationship between bank and customer can be determined by degree of customer contribution and cooperation relationship between bank and customer. Based on the above discussion, this paper presents that our country commercial bank should establish comprehensive foreign currency loan pricing model and explains the way to realize the model. Chapter 8 analyzes the main deciding factors of foreign currency loan pricing adopting regression method and validates the finance media theory that the longer the cooperation relationship between lender and bank, the lower the loan rate can be achieved. Besides, the result of regression show that the bank only emphasized cooperation with its customer, and neglected other factors including credit risk, mortgage and guarantee. As a result, the bank does not comply with principle that benefit and risk should be matched each other.
Keywords/Search Tags:foreign currency loan pricing, risk premium, relationship between bank and customer.
PDF Full Text Request
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