Research On Commercial Bank's Loan Pricing

Loan is one of the most important assets, as well as a primary source of profits and risks of commercial banks. As the reform on market-based interest rate of our country is pushed forward, market-based loan rates have been boosted gradually. Under this market mechanism, a key point of making decision for commercial banks to grant a loan for enterprises is to define a rational loan interest rate. In theory, different companies have different risks, so different loan rates should be determined based on the degree of risks. It is very necessary to define loan rates correctly for loaners and debtors, and it is also have great significance to fit the development of market-based interest rate. Because historical and realistic reasons, loan pricing methods have not received the due attention in our country, which make the commercial bank of our country lack essential theoretical research and technological reserve to loan pricing. These are becoming the obstacles of the bank's operation and further development.This article has introduced the deep meaning of loan pricing at first, and carries on the necessity studied in loan pricing at present. After that, this paper reviews the development of domestic and international loan pricing, then introduces foreign traditional loan pricing methods and the new developing methods in detail. The author hopes to make reference to commercial banks of China though analysing and comparing the methods of loan pricing.Generally speaking, foreign traditional loan pricing modes includes: cost-plus loan pricing, Bench Mark added mode, custom profitability analysis. The article has introduced and compared these three kinds of pricing modes separately in several aspects such as principals, merits and shortcomings, suitable conditions and ranges. There are some new developed loan pricing methods mainly refer to RAROC method and option method. RAROC model is a method of pricing based on capital at risk and default rate; Option loan pricing model is set out on the characteristics of call option which company common stock possess, constructs one commercial bank basic loan interest rate model based on the Black-Scholes option pricing model. In addition, theauthor has made a further research on the loan pricing model according to the current situation of our country by introducing the mortgage rate level, and utilizes the computer to simulate the corresponding data.Of course, this paper is not perfect. It still has a lot of deficiencies too. It only studies two kinds of new developed loan pricing modes, not put forward feasible scheme to the overall construction of the loan pricing system, and etc. Consequently, further and deepen discussion will be called for in the research afterwards.