Study On Credit Risk Early-Warning Of Chinese Commercial Bank

The question of how to avoid and control credit risk has long been the major concern for financial institutions and their monitoring departments all over the world. With the development of financial globalization and the intensified fluctuation in financial markets, banks and investments of various countries have been challenged by the problem of unprecedented credit risks in business. The World Bank's research study on the crisis of the word bank industry indicates that credit risk is the major causes for banks to go bankrupt. In China, it is commonly known that the credit asset quality in banks of commerce is so poor, and the bad loan ratio remains so high, that credit risk would constitute the biggest potential financial risk for bank of commerce in China. Besides, there exist certain defects in the credit risk management system in China's banks of commerce. Therefore a careful study on warming and management system of credit risk in banks of commerce would be highly significant in its theoretical as well as its practical sense.In this regard, firstly this paper simply introduces credit risk and states the important significance of constructing early-warning system of the credit risk of commercial bank and summarizes the state quo of credit risk management and related theory of warning. This paper introduces the concept of early-warning system of the credit risk by the way of analyzing the cause of credit risk in our country. Then this paper does profound research on the model of credit risk's indexes. On the base of much study and talks with experts, using AHP method, expert idea method and function coefficient method, this paper constructs level analysis model and quantifies the each risk index in every layer. With the application of the gray theory, an early warming model of the loan risk is presented for forecasting and appraising the further development of the loan risks. In the end, we demonstrate the process of the study by case in Zhen Jiang bank. Thus we put forward some ideas to better an early warming mechanism of loan risks, which is available in the situation of our commercial banks.