Customer Relationship Loan-pricing Model Based On RAROC

With the acceleration of chinese interest marketization reform,allowing foreign banks to run RMB business and BaselⅡcapital requirement,chinese commercial banks confront a more competitive market condition,a more sever interior and exterior risk manangement and capital mornitoring.Under this condition,chinese commercial banks must change the old method of making loan pricing like under interest control enviroment.Commercial banks must know the loan pricing statue quo in China and the existing problems in loan pricing system.On this basis,commercial banks should learn the foreign banks'loan pricing methods and establish the loan pricing model and system which can suit for the certain commercial bank.At present,chinese commercial banks have aquired more autonomous rights to make the loan price alone and can offer loan an different price to customers with different credit risk.The banks can get higher compesation for higher risk loans,and lower compensation for lower risk loans.Advanced banks in foreign countries can precisely measure loans'risk and offer proper price for their loans.While chinese commercial banks used to assess the loans'risk approximately.How to properly make the loan price on the basis of matching risk and revemues and how to incorporate BaselⅡcapital requirement are the magnifudious challenge for chinese commercial banks.So the study of loan pricing has great significance theoretically and pracitically.The paper sums the theoretical and practical literatures about loan pricing at first.It is discovered that RAROC model is wildly used in international financial business.Itwill be a trend of chinese commercial banks'loan pricing.Meanwhile,the Asymmetric information between banks and customers have great effect on the decision of whether offer loans to certain customers and what kind of loan price is suitable,especially influencing the costumers of small and medium-sized corporates.So long time cooperation relationship between bank and customer must be taken into account in making loan pricing.And this paper introduces three traditional loan pricing model respectively.They are Cost-plus loan pricing model,Pricing-leading model and customer profitibility analysis model.This paper analyze their pricing principle ,advantage and disadvantage,premise,applied ranges,and the reference significance to chinese commercial banks'loan pricing.Then this paper demenstrates the RAROC loan pricing principle and decompose the main parts of RAROC,and analyze the main parts on quatitative basis.At last,the paper combines the cusomer profitability analysis model and RAROC model to establish customer relationship loan pricing model based on RAROC.This model herits the advantage of RAROC model,such as risk management,capital allocation,measurement performance and value management etc.It combines the conception of revenue contribution in customer profitability ananlysis model with the conception of risk contribution in RAROC model.This overwhelms the limitation of Customer profitability ananlysis model which can only be used when bank and customer have long time business cooperation relationship.This model can not only be used in offering loans to small and medium-sized corporates ,but also can be used in offering loans to new and potential customers.