Study Of Current Loan Pricing Of Commercial Bank In China

Loan pricing is the key factor of credit risk management which ensures the profitability of commercial banks. Due to the long-term control interest rate, commercial banks in China lack the practical experience and therefore loan pricing management is weak and the methods of loan pricing are limited.In recent years, as the process of market-oriented reform of interest rate system accelerates, China sees the transformation from management system of interest rate control to market-oriented reform of interest rate system. During this period, the interest rate control was canceled, but the complete interest rate liberalization has not achieved. The upper limit of loan interest rate was released, while the lower limit of interest rate is still restricted. The current method of loan pricing is the one that is applicable to the period of interest rate control but not fit for the transition period. Therefore, the methods of current loan pricing need improvement for commercial banks and methods of loan pricing fit for the transition period should be developed. It's quite meaningful for commercial banks to ensure their profitability and maintain competitiveness.The first part of the paper is the introduction on the meaning of this topic, domestic and foreign literatures and structures of the paper. The second paper introduces the basic content of loan pricing and the theoretic basis of loan pricing. Then the basic principle and influencing factors is analyzed, which is the theoretic basis of the following loan pricing in China. The third part analyzes the credit risk pricing more deeply based on the important effect of credit risk level on loan pricing. The basis of credit risk pricing, the relative contents of customer credit rating and some factors of measuring credit risk including probability of default (PD), loss given default (LGD), risk exposure and unanticipated loss, is analyzed. The representative of current model of credit risk measurement, credit monitoring model, is introduced and its application to loan pricing is analyzed, which provide the reference for the following estimation and measurement of credit risk. The forth part of this paper focuses on the current situation of loan pricing. Because of the former interest rate control system and the weaknesses of the relative system, the cost-benefit symmetry principle is not applied to the current loan pricing and the measurement of risk premium is not complete. The reasons for this are analyzed. The fifth part suggests that as the process of...