Research On Bank Credit Risk In Resource Enriched Region

Yulin City of Shaanxi Province is located in the core area of Ordos Basin,one among the rare mineral resource-rich regions across the country.Over the years, the economy and the financial sector in Yulin City have grown rapidly with the energy economy playing a dominating role, and the city has become the engine for the development of Shaanxi Province.However, the fast-paced economy in Yulin shares a very similar development model with most resource-rich regions: a less diversified industrial structure which is generally dominated by energy or downstream sectors with the secondary sector accounting for more than 70% of the city’s GDP and industry accounting for around 90% of the secondary sector, reflecting that the city’s economy has a very strong reliance on its mineral resources.Most of the key economic indicators of Yulin have declined since 2013 as affected by the increasing downside pressure on the nation’s macro economy, the insufficient demand on energy products, and especially the continuous decline of coal prices, highlighting a pronounced structural imbalance with the effect of resource curse beginning to be visible. In2015, Yulin’s GDP grew only 4.3%, 2.6 points lower than the nation’s pace and 3.7 points lower than Shaanxi’s rate. As a result, it is inevitable for the city’s economy to have witnessed a trend of surging exposure at financial institutions and NPLs(non-performing loans). As of the end of 2015, the NPL ratio in the city’s banking sector rose 147.70%year-on-year and surged 859.82% compared with the end of 2013.Through field visits to six county of Yulin,different in economic structure and risk, as well as to more than 20 financial institutions,this paper summarizes the common and prominent problems.It can be observed that Yulin’s economy is characterized by the acceleration of credit risk outbreak, severe deterioration of credit environment, “ the state advances, the private sector retreats” in credit policy, and great difficulties in disposing and writing-off. In addition, by analyzing the sampling microdata, it can be observed that the trend towards more concentrated risk and further deteriorating is also remarkable.In response to the aforesaid circumstances, this paper analyzes the causes behind the formation of credit risks in resource-rich regions through four routes, i.e., loan concentration, private lending, real estate, as well as mutual and joint guaranteed loans. This paper has sorted out the routes through which credit risks are formed and the findings in this paper have a relatively strong practical significance for microeconomic entities in commercial banking sector to adjust their credit policies and credit structures; meanwhile, these findings can also lend reference togovernments and financial regulators when formulating economic and financial policies.