Cause Analysis Of Our Country's Banking Bad Assets And Credit Asset Quality Management System

Bank is an enterprise, which deals in money, the special commodity. It has the basic characters of common enterprises, but it also has two particularities. The first one is that the commodity, money, is special. The second one is that the management itself is special. Bank is an enterprise whose liability ratio is very high. With business license and the level effect of capital abundance ratio, bank expands its asset by continuously increase liability. Meanwhile, high risk is coming.Once its management risk turns into real loss and becomes bad credit assets, not only does bank probably bankrupt, but also it would bring the whole macro-economy domino effect, because of bank's management characters and key role and function in one country's macro-economy. Domestic and overseas experience and lessons reveal that too high bad asset ratio is always one of the dominant causes of bank bankruptcy and bank crisis. IMF's statistics indicate that since 1980, each member country's finance matters, which are caused by too high bad asset ratio, have exceeded 60% of all the finance matters, and finance crises caused by too high bad asset ratio have exceeded 58%.The main business of our country's banking was, now is, and will be in the long term, deposit & loan traditional operation, etc. So the risk of banking mostly represents the risk of credit assets, viz. the issue of bad assets. The emergence and development of bad assets would cumulate to a certain extent, lick up banks' capitals step by step, endanger depositors' interests, and finally spawn finance storms or crisis, even arise serious social problems, if they could not be controlled and resolved in time.There are many causes that form bad assets. Some is weak inner management. Some is external policy and environment interference. Some is life cycle of borrowing enterprises, etc. In the given phase and period, these causes work with different extent. Every phase has its dominant cause that decides the bad assets' main trend. With stepwise perfect of our country's market economy system, the external abnormal shocks are going to be weak, whereas the decisive effect of banks' management will be strengthened. In other words, bank's itself controllable or partly controllable causes will enhance their decisive effect during the forming of bad assets, while external non-controllable causes are fell in or stabilized step by step.Consequently, our country's banking desiderates resolving such proposition: it is through strengthening management and minimizing itself controllable causes' impact thatthe mission of settling and defending bad assets is accomplished. But this proposition has no ready-made answer. Especially, if we only give run-of-mill, even inane, advice and measures, it is no use to resolve existing stock and stepwise exposed increment of our country's bad assets. So we must aim at the reality of our banking management, give operational, material and standard management system, and apply it into real banking management. It is effective that we do so.This paper describes and analyzes the cause of the formation of bad assets from the situation of bad loan in banking in China. With market economic of China basically established and society credit improved step by step, this paper points out that the weakening of management and the shortcoming of the system of management is the ultimate cause of the formation of malignant cumulation and indigestibility of bad assets based on the theories and analytical methods of TQM. And this paper tries to import the idea, the principle, the frame and the methods of ISO9000 to establish and the standard management system for the quality of banking credit assets of China and bring it into effect in order to solve the problem of bad assets of banking.The outline: the paper is divided into five parts.Part I is Chapter 1, viz. introduction, which not only introduces the background and the purport of this research, and research development and results on this topic, but also the method and thought of this paper.Part II is Chapter 2, which presen...