Deal With The Problem Of China's Small And Medium-sized Commercial Banks' Bad Assets

At present, the topic of bad assets management has been a major concern in our country. Since there exist so many bad assets in our commercial bank system. But the research in this field now is only confined to the four state-owned commercial banks and neglects the small banks. In fact there is urgent demand of bad assets management in these small banks. This dissertation provides some preliminary research on this issue.At first, this article analyzes the particularity of the bad assets management in small banks. Then it uses the principle of asymmetric information to analyze the adverse selection and moral risk during the procedure of management in small banks and provides the solution to these problems. The next is to decide the key points of bad assets management scheme of small banks in accordance with its particularity as well as precautions of asymmetric information during the process. At last, it gives a comprehensive examination of internal funds flow, benefits allocation and loan scale changes during the procedure to judge how perfect the scheme is.This article consists of an introduction and two parts.The introduction discusses the issue in general. Firstly, it defines the basic concepts such as bad assets, bad claims and bad loans. Secondly, it supplies varied criteria for evaluating the commercial bank loans----normal, overdue, dull and frozen from the point of view of period and normal, care, low, suspect and loss from the perspective of risk.The first part is divided into two chapters. The first one analyzes the necessity for bad assets management in small banks. According to statistics, the bad loan ratio is about 20 per cent in small banks and the situation is even worse due to the disequilibrium distribution among areas. To deal with the bad assets in small banks in time can mitigate the facing credit risk efficiently, improve their management level, enhance their external financing ability and benefit the mitigation of financial risks and prevention of financial crisis as well.The second chapter analyzes the particularity of small banks' bad assets management in our country. Comparing with the four state-owned commercial banks, there are much particularity in small banks' bad assets management. The particularity mainly shows in the aspects blow----the management are business dealings; only their subordinate institutions can undertake the management; the necessary funds can only be raised by themselves; the prices of bad assets to be dealt with can only be set by market; the bad assets can only be checked-off after the management; the aim of management is to maximize the reclamation value; management institutions lack effective means and the staff structure is rather single and so on.The second part of this thesis consists of three chapters. Chapter1 analyzes the probable asymmetric information issue while managing the bad assets in small banks. When small banks deal with their bad assets, adverse selection and moral risk maybe emerge due to the different information owned by the parties.Adverse selection mainly occurs in the step when commercial banks' branches sell bad assets to the management institutions. To Solve this problem, we can take measures as below----the commercial banks' branches which demand to sell bad assets are required to reveal the information about these assets in standard way, design appropriate withdrawal mechanism for the managing institutions in the process of management.Moral risk may emerge in three steps. The first one is about the commercial banks' subordinate institutions which deal with the bad assets misuse the dealing funds. To prevent this, we can require these institutions disclose their plans of purchasing and dealing with bad assets and establish related institutions to restrict each other. The second one is that the management institutions mishandle the bad assets. We can found a supervisory committee to prohibit this. The third one is that the commercial banks' branches which sell bad assets supply auxiliary service to management...