China's Commercial Banks Credit Risk Management Study

Commercial bank is a type of enterprise. So like other enterprises,maximizing its profit is its ultimate target. In our country, credit risk is themain one in all kinds of risk in commercial banks. Because in a very longterm, in a situation our financial system in which indirect financing is sodominant is not going to change radically, deposit and loan are still themain operations in our commercial banks. It is the basis of their survivaland development. Credit assets are sill the main assets for commercialbanks in China, they are also the main revenue. The credit marketoccupation percentage, management level and risk control ability aredirectly related to competition strength and strategic goal for banks. Allthis makes credit risk management the urgent task that our commercialbank should face.. Credit risk is derived from credit operations and an impersonaleconomic phenomenon. It can not be perished, only can be controlled andreduced. So, it's very important to strengthen the management of creditrisk in the operation of commercial banks in order to avoid losses.Modern banking pays massive attention to credit risk management. Thedevelopment of economics and the progress of the technology make itmore and more mature and scientific. Joining WTO and the New BaselCapital Accord also force us to strive for higher standard in credit riskmanagement. The cause of credit risk should be analyzed from three aspects:social economics as a whole, enterprise and bank. The content of creditrisk management is mainly about its identification and calculation,control and solution. The credit risk that our banking industry is facing ismainly the increasing bad loans. In China, the "Big Four" state-ownedcommercial banks have a 13.37% bad loan rate in the end of thirdquarter last year. The credit risk for our commercial banks also has directinfluence on the social economics department's healthy operation andmonetary and financial policy's establishment and execution in ourcountry. Its current problems are mainly due to unclear risk responsibilityand risk concept, defects of the risk management organization system, theout-of-date risk management methods and the lacking of healthy creditculture. To construct and perfect the system of our commercial bank creditrisk management, it needs a series of work. It needs to build up a modernfinancial intuition system, strengthen the constrain of commercial bankbudget, push up commercial bank's operation and management level as awhole, strengthen risk concept. Only then we can establish a healthycredit risk management organization, we can make the most of themodern commercial bank risk control methods and instruments, and haveeffective control of the credit risk. To perfect the commercial bank innercredit risk management organization, we shall set up a better organizedand scientific credit risk management system. More specifically, we are toset up a scientific risk alarm system, research for risk control's creativemethods and establish and improve credit risk compensation system. Forthe credit risk management, not only we shall have a good analysis ofborrower, but also we shall have a good analysis of the industry in orderto improve credit risk management. To uncover different industries'development character is the core job for credit risk analysis, also is themost fundamental, the most common and the most important job. Atpresent in China, credit risk analysis for the commercial banks arefocusing on the borrowers, but neglect that industries are the mostimportant management object for credit risk this issue. Credit risk mustbe considered with industries, enterprise competing strength and productmarket space, and it shall be pushed to a new level. For a customer or anindustry, we ought to set a feasible exit and enter strategy and build up acredit exit and enter system. Credit risk happens so often because ofentering at the wrong time or exiting not in due time. Human are the most fundamental and key factor for every operationactivity. No matter how firm is the risk management plat...