Research On Risk Control Of Guarantee Circle From The Perspective Of Commercial Bank

A big Commercial Bank in China defined the "guarantee circle" as Enterprises through mutual security guarantee or interlinked guarantee to connect together formed the special stake holder with the chain of the guarantee relationship.Guarantee circle derive from the credit guarantee. Credit guarantee is one kind of financing tool for the enterprises accessing to the bank loans conveniently and fast. It effectively controls the credit risk of financial institutions and improve credit management capacity of commercial banks. Since the 1990s, relationship of credit guarantee becomes complicated in our country and the guarantee circle is quietly forming. There are favorable aspects in guarantee circle:first, enterprises who make use of the guarantee circle for packing listing is better than those without any guarantee. Second, virtuous circle is equivalent to under the condition that not to use monetary policy and fiscal policy to drive the money multiplier effect and increase the market liquidity. However, from the point of view of actual operation in China, it is more harm than good. Obviously, when the risk of the guarantee circle to a certain degree of accumulation, it will spread to other related companies. If one link in the funding chain broken, it will be easy to have a "domino effect", thus trigger the financial crisis. The guarantee circle not only bring the huge financial and operational pressures to many enterprises, but also seriously affected our financial security, therefore, from the perspective of commercial banks, research of guarantee circle risk has the practical significance.Since 2001, China's enterprise in guarantee circle bankruptcy case exposed by the media frequently, causing a high degree of emphasis by the domestic commercial banks'manage layer.In order to defuse the risk of the guarantee circle, commercial Banks in China presented a lot of documents in succession, calling for the establishment of the long-term mechanism to prevent the loans risk of the guarantee circle, and clearly defining a three-year work step by step to advance the defusing of the risk of stock of guarantee circle loans, cracking the hard problems of guarantee circle risk. There are four causes of China's guarantee circle:first, China's "Guarantee Law" exists "design" flaws, "Guarantee Law" introduced in 1995 does not expressly require the debtor can not provide the anti-guarantor for the guarantor. Second, China's stock market and bond market is not mature enough and applying for loans from banks is still the main channel for corporate financing. Third, China's information technology and "information sharing" platform is not perfect, credit information system building is still in the initial stage, difficult to support the banks to effectively monitor the risk of the guarantee circle. Forth, Commercial banks to their own reasons. As listed companies are relatively good credit, commercial banks are more willing to choose listed companies as guarantor or mortgagor, regardless of the association between the listed companies as a guarantor and the debtor.From the perspective of commercial banks, "guarantee circle" risk is credit risk. However, the risk of the guarantee circle compared to the general credit risk with the following differences:first, the concealment; second, cumulative; third, uncertainty; fourth, infectious. Guarantee circle risk is inherent in the management of bank credit. Most companies in "Guarantee circle" does not disclosure the guarantee matters in full and timely and conceal maliciously. the group client's financial accounting is lack of external constraints and financial information is generally untrue, the financial statements submitted to the bank are with low credibility. Banks are difficult to judge client, especially the group client's authenticity of operation and financial information, so that bank credit "the investigation's hard before credit, hard in place when accessing credit, difficult to achieve management after credit."Commercial banks required to better control the risk of the guarantee circle must first accurately identify the risks in three steps:first, the survey before loan; second, according to commercial bank's internal risk criteria set by four levels,we should rate the risk of guarantee circle; Third, by querying the credit manage system, we should monitor the financing companies conditions after the loans and avoid the phenomenon. Then, the risk calculation. Commercial banks generally used 6C to measure the risk of guarantee circle. the commercial banks in China credit risk in order to strengthen the unified management of the guarantee circle, introducing a set of "security ring inquiry and identification method" system for branched to use, which will be classified guarantee ciecle rating criteria into four categories:1. The guarantee circle belongs to controled guarantee circle; 2. The guarantee circle belongs to the general risk guarantee circle; 3. The guarantee circle belongs to the greater risk guarantee circle; 4. The guarantee circle belongs to the serious risk guarantee circle.The first and second-class risk of guarantee circle is acceptable by commercial banks,. The third and forth class risk of guarantee circle make a greater impact on banks, banks should strengthen their risk control on these two types.There are three strategies for commercial banks improving risk control for the guarantee circle:first, by setting defusing the risk indicators of guarantee circle, perfecting the assessment, planing as a whole and co-coordinating mechanism with the guarantee circle, to establish an independent risk rating orgnization to perfect the risk control of the guarantee circle mechanism; second is to strengthen the risk control of the guarantee circle before happening and the remedial measures after happening. Through setting the defusing risk indicators, we could make investigation before loans and be strict with initial investigation to reduce the risk of a security. We should manage the clients with category, and closure purification, perfect credit withdrawal, replacement, alteration, transfer, clean-up mechanisms to improve the risk of guarantee circle remedial measures; the third is cooperating with the commercial insurance to split the risks of the guarantee circle.