China's Commercial Banks Credit Risk Management Study

The year of 1997 witnessed financial turmoil in Asian countries. Financial crisis broke out in Thailand in the beginning and then spread out all though the Southeast Asia just like a sudden storm. People were drawn into a terrible nightmare in a day. On July 2nd, the Thailand government declared to gi up the fixed rate of exchange system. The Thailand currency devaluated for 20% on that day. Just from then on, the Financial Crisis burned out through the Southeast Asia like plague. The Philippines, Malaysia, Burma and Indonesia had their currency devaluated one after another. From July 2nd to September 4th, there, came a great currency devaluation to U.S. dollar in those countries. Then, the world 11th largest economic system, Korea, was caught in the serious financial crisis. Finally, the second largest economic power of the world, Japan, was no exception and its financial sector was found deep in crisis. Such financial crisis has already resulted in serious currency devaluation in these countries, plunge of stock markets, shutdown of financial institutions, and above all, crash of their economies. Consequently, the growth of the world economy retarded in 1998. Even some draw to a conclusion that Asia had ended its round of great development. Common opinions believed that the growth of the economies in Asia would be vigourless in the upcoming years after the financial crisis. Although few economists considered that the breakout of the financial crisis is good to the future development of the Asia finance because the Asian financial sectors were djusted?and the bubbles vere fallen off the economy. The opinions differ from each other. In the countries where the financial crisis broke out, people take great pains to understand the isk of finance?which the economist usually talk about. No countries would like to see it happened in them someday. Obviously, how to prevent financial risks has become a worldwide subject. So brittle were the financial systems in Asia countries. People have to think about the financial system and the banking credit crisis once more. Senior economists pointed out that the financial crisis was effected by the unreasonable financial system and the accumulation of the credit crisis. It seemed the crisis burn out in a sudden. However, in fact it would break out eventually due to the unreasonable financial system and the accumulation of the credit crisis. When we study seriously how the financial crisis happened we would find out the governments?negligence of market regulating was one of the causes of such wretched results. To meet the needs to prevent and resolve the financial risk, effective measures should be taken to build a trong?financial system and risk management systems. To that end, it is the common understanding to decrease the influence of the government in banking, to follow the market disciplines and to carry out scientific management. In China, the year of 1997 was the year for prevention of financial risks. At the National Financial Working Conference of 1997, the prevention and resolution of financial risks was specified as an important task in economic administration. As commercial banks are mainstay of the financial market in China, it is up to them to assume the majority of financial risks and their economic activities are where financial risks are built up. As our financing mechanism features indirect financing, and bank lending features traditional credit operations, the financial risks in China mainly focus on credit operations, and are in the form of credit risks. We escaped fr...