A Study On Internal Control Of Credit Risk In Chinese Commercial Banks

Credit risk is one of the major risks which commercial banks faced in the process of operation. Credit risk will not only cause bank's losses and lead to bankruptcy, but also give birth to the financial and economic crisis in a country or a region when it gets worse. The accumulation of credit risk inside banking system in China and problems with internal control of credit risk are in the highlight of society while they are the focus of both academic study and all commercial banks.Firstly, the article makes use of asymmetric information theory to deeply study the sources of credit risk. It makes a point that internal control of credit risk is among the most important institutional arrangements and technique means which prevent and deal with credit risk, increase the operating efficiency and performance of commercial banks. Secondly, on the basis of Basel Committee's requirements on internal control, we propose the main contents of internal control of credit risk inside commercial banks. Thirdly, we review the experience of the development of internal control system of domestic commercial banks, draw its status quo, and give a detailed analysis on the internal control system of credit risk in a domestic commercial bank. Last of all, we analyze the problems within domestic banking industry, point to the difficulties with improvement in internal control of credit risk, and propose the goals, principles and path to develop the internal control system of credit risk in commercial banks in China.