Analysis On Efficiency Of Credit Decision Making

The reform of state-owned commercial bank is always the key point in financial systerm reform. Since 2003, authority confirmed stock-transformation of state-owned commercial bank. But, compared with European and American banks, our commercial bank is still in low efficiency movement, profit ability is low. Together with low profit ability is high non-performing loan rate. The quality of state-owned bank in the credit decision-making, risk management technology, and method is improved slightly. Carrying out research on commercial bank's credit decision-making efficiency and decision-making method is extremely urgent to bank's manager and essential to increases the bank's income. This dissertation attempts to carry on the theoretical analysis on the efficiency of bank credit decision system in economic frame. The following states the primary coverage and the viewpoint of the paper.This article first puts forward the concept of credit decision system. In the second chapter, elaborated the organization system and integrant of the credit decision-making system. We point out that the credit management, the approval and the risk management departments form a feedback system, have relatively independent status. The credit decision system only forms after the commercial bank corporation reform completely. First, the credit management department discovers and creates the effective demand; attains information to analysis credit risk and income. Second, the credit approval department is the highest policy-making organ in the commercial bank to make credit decisions, responsible to examine and approve the loan in line of business rule. The loans examine and approve under authorization. Third, the risk management department is responsible for the daily loan audit, examines each loan record, monitors and forecasts the loan condition and the loan risk, responsible for the classification of loan, risk control and risk transformation. In the narrow sense, credit decision-making technology refers to the technology of risk-measuring and price-setting of loan. In broad sense it should include risk management technology for any kind of credit decision-making. The credit risk management is a scientific management method, through risk recognition, weight, appraisal and control to realize the biggest safety with the smallest cost. The credit decision-making rules including the loan post duty rule, approval- conduction separation rule, credit risk control rule. The board of directors and superior manager stimulate enthusiasm of credit staff with material and spiritual method.Third chapter summarizes the economic efficiency decomposition and the evaluation criteria. The efficiency is core concept in economics,"efficiency"can refer to the most optimal utilization of the resources, also may refer to the degree of resources utilization. First we elaborated the Farrell-Debreu's theory, the efficiency loss decomposed into technical inefficiency and allocative inefficiency. Further more, according to the theory of institutional economics, the efficiency loss may decompose once more into the technical inefficiency and the institutional inefficiency. Compared with the Leibenstain's X-efficiency theory, actual output of a firm is often lower than its possible output level, the economic activity is conducted by individual, and therefore the economic research must take individual as basic unit, not the firm. Through the comparison among technical efficiency, the institutional efficiency and X-efficiency, we know that technical efficiency and institutional efficiency is developed from the neoclassic frame, release the hypothesis that the technology and the system is fixed, obtains knowledge in technology and institution domains by economic method; But X-efficiency did not emphasize complete rationality, has significant difference with the technical efficiency and institutional efficiency on the theory frame. For theoretically consideration, we must take that X-efficiency effct in organization interior; there are no interactions between organization and motive, transaction cost, technics; suppose them independent.The fourth chapter carries on the analysis on credit decision-making efficiency theoretically. From the positive research about efficiency of domestic and foreign bank, we induce some conclusion. 1. In transition period, using the efficiency frontier analysis method, efficiency difference between observed bank and the efficiency frontier includ technical inefficiency, institutional inefficiency and X-inefficiency.2. take loan and securities as output, the labor, the fixed asset and the fund cost as input, may regard as measurement of efficience of bank credit decision-making process.3. Expands"the human resources management, the technical application, the flow design"factors in the foreign essay."The human resources"take by motivation and pressure to the bank staff;"The technical application"considered technical characters;"The procedure design"replaces by the system factor. Thereafter we establish a unified mathematical model to describe inefficiency of credit decision-making.The fifth chapter analyzes reasons for credit decision-making inefficiency. First, the reason for technical inefficiency includ: (1)between the international advanced bank and our banks, big gap do exist in credit decision-making technology;(2) The credit decision-making technology is special - the risk management technology usually based on credible, unified statistical model, needs long time to accumulate data, the quality of credit decision-making data is not good, the credit decision-making technology efficiency is lower than the optimal level; (3) The credit decision-making technology is extremely difference between an expert and a clerk, the bank headquarter and its branch, the technology transition interpersonal and interbank needs long time. Second, we analyze reasons for institutional inefficiency of credit decision-making. The transaction cost of credit decision-making system may divide into post duty cost, information cost, supervision cost. The determination of post duty is difficult. Customer manager mainly collects the detailed information of project; the information must be accurate, objective, comprehensive and concrete. But the bank does not have corresponding standard about accurate, objective, comprehensive, concrete, cause the expense to determine the duty of customer manager very high. Separation of approval and conduction cause the information to be asymmetrical, and is able to restrict the bank's normal development. The risk monitoring expense is high. The risk management department acquires information to classify risk, this spends time and energy. To manage loan risk needs recognition and measurement, adopts the measure model, carries on portfolio management, this needs labor and electric system.Third, we analyze X-inefficiency of credit decision-making. From banking industry's viewpiont the reason for X-inefficiency of credit decision-making list below: (1)The contract of credit decision-making staff is incomplete; (2)The accurate outputs of credit decision-making is determined incompletely; (3)The inputs of risk policy-maker can not obtain through market; (4) bank imitates each other, other than competition; (5)there is a pressure faultage between superior manager and the approval staff. From our country's peculiar circumstance, the organization of state-owned commercial bank is huge and overstaffed, management methods are traditional. X inefficiency is more serious.Sixth chapter proposes the countermeasures for inefficiency of credit decision-making. The countermeasure of technical inefficiency includes: (1) promote the level of commercial bank's risk management, introduce advanced risk management technology, especially the quantitative analysis technology, enhances the ablity of using measurement model; (2)establishe database of individual and corporation, support the high-level risk management system;(3) collect credit record nationwide, share the bank credit information, accumulate credit data faster, reduce collection time; (4)strengthen the credit-data center of People's Bank, develop credit risk measurement model, provide borrower's accurate credit parameter. The countermeasures of institutional inefficiency is, (1)reasonable confirm post duty; (2) improve approval and conduction separation system, such as, setting up a specialized agency to be responsible for the loan compliance examination, the loan approval committee is responsible for the appraisal of credit risk; reduce the number of approval committee, enhance credit decision supporting system; in order to solve the problem of asymmetry information, provide borrower's information to approval committee by a third party, to verify the loan material sends for approval by customer manager; improve the ability of investigation department, reduce the senseless investigation. Third, harmonize the risk management strength of various sector, reduce the quantity of inspection. Use modern network and computer technology to improve ability of credit decision-making and risk classification. The countermeasures of X inefficiency in credit decision-making include: detrmine motivation standard scientifically; build harmonious credit culture.