Analyzing And Preventing Moral Hazard From Preliminary Credit Reviewer

Today, no-performing loan is the critical problem which the commercial bank has to deal with. In this filed, there are too much attention on macro-environment and economic system, while less on the behavior of general person.In this paper, with the view of information economic, we discuss the different behavior of preliminary credit reviewer with the restriction and without the restriction, which bring different risk to our company, and try to point out the solution. There, we separate loan risk into distinct parts: adverse selection and moral hazard. The moral hazards in the loan-risk management of commercial bank are various and complicated, with the beginning problem between the president and preliminary risk reviewer. We describe the whole flow of a loan and emphasize the first part of loan. Here, we suggest that the quality of loan lies on not only the capability of finding the real of a loan but also the willingness of the reviewer to tell all the things he knows, in spite of it is good or bad to him.To a preliminary risk reviewer, the private individual is composed of three parts: rent-seeking, income relating with the quality of loan, penalty for found rent-seeking. In practice, we find that there is great change after the first loan. In the first time ,we provide a loan, restrict examining system will have an intended or expected effect on preventing the no-performing loan, but less effect on rent-seeking while the loan is fine; in the following period, the income of risk reviewer is together with the quality of a loan ,when the loan is reapplied , the best choice is to reprovide,and take the income, reproviding and avoiding the penalty take the second place, refusing the loan takes the third place ,the worst choice is to reject the loan and accept the penalty. Changing the conditions of the game theory, we drew a conclusion that it is the information symmetry and the inclination of examining system which make influence on the moral hazard. We should change the flow of providing a loan: two-person-management, separate refund from reprovide. Then, we will have a better expectation owning to reducing the asymmetry of a loan.