Study On Risk Management Of Commercial Bank M&A Loans In China

M & A loan is one of the financial supporting policies to help domestic enterprises to cope with the current international financial crisis and expand domestic demand and to stimulate the economy through financial measures. The release of M & A loans broadened financing channels of the acquisition, promoted the law relating to mergers and acquisitions, and accelerated the innovation of regulations of taxation, asset valuation, etc. All of those will create a beneficial environment where national companies can sharpen the competitiveness and increase their strength by merging and reorganization.Due to the features of loan such as long-term and its sum, once the failure of acquisition of loan comes, both commercial banks and the economy as a whole will be serious impacted. Therefore, the orderly development of M & A loans will benefit the real economy and financial fields.Therefore, the studies on commercial bank loan risk management can help establish business standards of M & A loan by commercial banks, regulate norms of their business practices and improve commercial bank M & A lending risk management capacity and its supervision.Taking the perspective of commercial banks, this article takes an in-depth study of the special nature of loans, identify the risk of M & A loans through its business processes, and make a comprehensive analysis of China's commercial banks to explore an effective way to control M & A loan risk and offer a framework of risk management of M & A loans.This paper consists of five parts:Chapter I makes an Introduction of the background and significance of the main topics of this paper, relevant concepts and the framework of the study, as well as the logic and the approach the author has taken to undertake the study. This article also deals with difficulties during the process of research and their solutions. The second chapter introduces theories of mergers and acquisitions financing and M & A at home and abroad loans and its specialties. Since foreign capital markets are well-developed, the principal means of financing mergers and acquisitions is to issue bonds, thus the theoretical study abroad are mainly on bond financing research and reasoning but little on the M & A loans.Domestic research on M & A loans is also scarce, and in 2009 a number of scholars did some research of the risk of loans for mergers and acquisitions, but their studies are not comprehensive in depth.ChapterⅢfocuses on the identification of the loan risk. This paper takes a hierarchical recognition method, with a consideration of M & A loans business processes, to identify M & A lending risk. The business process of M & A loans generally includes steps as follows:pre-marketing, business acceptance, due diligence and risk assessment, contract signing and loans, post-loan management, etc.M & A lending is unique:a high qualification requirements for banks, the specialty of the source of repayment, the special risk inherent. This paper also analyzes the main risks are strategic risk, integration risk, operational risk, financial risk, legal compliance risk and macroeconomic risk. ChapterⅣanalyzes the M&A loan risk control. This paper holds that the risk control of the M&A loan should be paid close attention to the process and control the risk of every detail in order to guarantee the issue-management-recovery of the M&A loan. A prudent option and investigation should be made and a professional risk assess team should be established, before the issue of the M & A loans. In M & A loan duration, three issues should be attached attention to:the assessment of the cash flow of the two parties, establishing special accounts for financial monitoring and the implementation of the key terms of the contract. When the non-performing loans occurs, commercial banks should adopt measures like a mandatory prepayment, risk isolation and timely loan recovery measures.ChapterⅤdeals with problems needing attention in risk management of M&A loan. Due to the particularity and complexity of the M&A loan, When commercial banks undertake the risk management of mergers and acquisitions loan,, the M & A source of credit risk should be attached importance to, apart from the control strategic risk, integration risk, financial risk management, legal compliance risks, macroeconomic risks to the proper risk control.There are three main aspects of innovation in this paper. First, the topic is of great novelty:it is the first comprehensive and systematic exposition of China's commercial banks M & A loans risk management, ever since commercial banks were allowed to issue loans for mergers and acquisitions. Second, the author takes an unique perspective:there are many literatures about study on the risks of the M & A financing, but there are few that take the stand point of commercial banks to study M & A lending risk—one of the ways of financing mergers and acquisitions. This paper attempt to offer a reference for commercial banks that first deal in this business. The Third chapter, which is also a major contribution of this article, deals with the special nature of M & A loans and makes a comprehensive analysis of the risk control of M & A loans,, with consideration of the process of M & A control lending risks for commercial banks, thus offers a framework for M&A loan risk management of commercial banks.One Shortcoming of this article is that there is no quantitative analysis of the M&A loan risk. As the relatively short duration of the M&A loans, limited the data collected, and the special nature of M & A loans which can affect the variables of the risk, this paper does not do measurement of M & A credit risk. Therefore the subject needs further study.