A Study On Syndicate Credit Risk Management In Commercial Banks

Given their apparent competitive and resource advantages and that fact that they bring high return to the banks, syndicate companies are high profile and sought-after clients of the commercial banks. However, because of the lacking of a strong credit risk management on loans to the syndicates, commercial banks nowadays often face the challenges of over extending credits to the syndicates, leaving enormous risks behind. In some areas, syndicate credit risk has become the key credit risk of local commercial banks. Along with the financial scandals of public traded companies such as Piqiuhua, Nongkai and Sanqiu, especially the falling of Delong Group of Companies, syndicate credit risk has called for an immediate attention by commercial banks and regulators.This article analyzes through three chapters the identification and characteristics of syndicate clients, the features and causes of syndicate credit risks, and measurements to control and prevent syndicate credit risks. In Chapter One, the author explains the benchmarks to identify syndicate clients, describes the types of syndicate clients and their characteristics, and analyzes the current status of commercial lending to syndicate clients. In Chapter Two, through analyzing the Delong Scandal, the author illustrates the types and forms of syndicate credit risks, highlights the features of syndicate credit risks in commercial banks, presents the analysis of major causes to syndicate credit risks. In Chapter Three, the author discusses the key measurements to control and prevent syndicate credit risks, which involve, in term of sequence, setting the mission of syndicate credit risk management, strengthening the credit risk rating on syndicate clients, placing a limit on exposures to syndicate clients, and lastly, perfecting the syndicate credit risk management system.The author believes that lending to syndicate clients is like a double-edge sword, i.e. there are cons and pros to commercial banks. While lending to syndicate companies can bring considerable profit to the banks, it can bring tremendous risks that...