Study On Risk Management Of Real Estate Loans Of Chinese Commercial Banks

A commoditized and monetized real estate market, instead of welfare residential apartment distribution, has been established since the "house reform" at the end of twentieth century. The real estate market has come through a great development or innovation in the past years after house reform and the housing problem has become one of the most important livelihood issues. The Chinese real estate enterprises'financing demand largely depends on the commercial banks, because the real estate industry is typically capital-intensive and there is a relatively high threshold for direct financing. The housing price rising steadily and the real estate loan amount grew rapidly during these years; therefore, larger risk was accumulated in commercial banks. The supervisor has made plenty of macroeconomic policies, as to control soaring housing price. The remaining proportion of real estate loans in total lending has reached about 20% up to April, 2010, in some joint-equity banks, this number is above 30%. If loans which mortgaged by real estate reckoned in, the real estate relating loans amount is close to half of total lending. The risk management issue of real estate loans was getting more emphasized by banks and supervisors, so a thorough research might has both theoretical and practical significance.This dissertation will analyze the current condition of Chinese real estate loan market by both theoretical and practical method and give several suggestions from mechanism, strategy and business procedure. The first section gives the researching value and methods to use in this dissertation and the situation of study home and abroad was also enumerated here. The second section summarized theories on the formation and conduction of risk in housing loan, and then analyzed the feasibility for applying these theories. The risk types in Chinese real estate loan market were also illustrated in this part, including credit risk, market risk, liquidity risk for individual housing loan, real estate developer loan and land banking loan, which were defined and differentiated by Basel Accords. The caution to Chinese real estate loan market of global financial crisis that caused by subprime loan was also mentioned. The third section enumerated the macro-condition of Chinese real estate loans, the rational price level and investment value were assessed as well in empirical methods. Then specific information of listed commercial banks according to their annual reports, an estimation of the risk level and the endurance capability for the contingent house price dropping came next. This part also analyzed the relativity between house price and asset quality of commercial banks. These two variables were proved to be correlating positively by former research based on developed countries, to be specific, the risen of house price lead to the improvement of commercial bank's asset quality and vice versa, however, this conclusion was not verified by Chinese house price market(house sales price index in national housing prosperity index system as representative data) and asset quality of Chinese banks(non-performing rate as representative data, adjusted by asset peeling-off factors), or the continuous rising of house price is not obviously contribute to the increase of banks'asset quality, the probable reason is the different hypothesis or market circumstances home and abroad like institutional and systematic differences. The fourth section has given several suggestions from different aspects, such as the perfection of domestic real estate market and its funding market, the improvement of risk management strategy and internal control, including personal credit system construction, innovation of regulation, completion of mortgage procedure and collateral value monitoring, credit workflow evaluation and reproduction, application of housing price early warning system and advanced risk statistics method, and improvement of mortgage-backed securitization.