Study On Management Of Retail Credit Risk In Rural Credit Cooperative

Credit risk is one of the most primitive risks in human society and the original risk in the commodity economy. Nowadays credit risk has gradually "accumulated", suddenly broke out and become an important factor in the stability of financial system and socio-economics. Rural small and medium financial institutions with great amount have become an important constitution in our financial system; however, for financial institutions, the small scale and fragility to resistance and risk management became the prominent factor in the stability of our financial system. At present, the main factor that induced financial institutions risk in rural areas has been the credit risk, particularly the retailing credit risk. Therefore, to strengthen the management of retail credit risk could not only improve the level of credit risk management in rural financial institutions and ensure the stability of the financial and economic system; but also solve the problem of loans demand for rural residents, especially for those vulnerable and disadvantaged groups. In this way the economic and social development in rural areas could be assured and promoted.In this paper some terminologies like credit risk, retail credit and others have been defined, and the objects for research have also been determined, that is, the retail credit and individual risk management. Analysis on the relative concepts and processes of the credit risk management has made the two critical points---the model of credit risk measurement and control technology for research. And for these two aspects those domestic and overseas research achievements have been systematically reviewed and the focus has been put on the statement of security theory as one special risk control mechanism.In this paper, rural credit cooperatives in Dezhou city have been taken as the case for study. General conditions of rural credit cooperatives and Dezhou city have got brief introduction. The objective analysis and evaluation on the loan quality and management of the rural credit cooperatives in Dezhou city have been given. On this basis, it is initially to be determined that the classical credit risk measurement technique should be employed in the credit risk measurement and credit guarantee be mainly used in risk control.Based on the relative theory reviews and case analysis on the rural credit cooperatives in Dezhou city, in this paper a new model of credit risk measurement and "ring-patterned" credit security mode have been put forward. By logical analysis this article has got conclusion for several main factors that affected credit risk --- income, expenditure, assets and liabilities and furthermore the model for measurement of credit risk has been proposed. Statements on the group lending and other related terms have been given for improvement of credit security model; "ring-patterned" credit security mode has been put on the basis of analysis on the advantages and disadvantages of the group lending model and the study on practical conditions in Dezhou city.The method for research in this article mainly has been the combinations of qualitative and quantitative analysis and logical and mathematical analysis. With the practical activities rural credit cooperatives in Dezhou city, this article has made in-depth analysis and proper innovations. Innovative development ideas and relevant solutions for the development of retail credit business in rural credit cooperatives have been suggested. The related results in this research could been directly applied to the management of credit risk in rural credit cooperatives.Compared with those previous studies, this article has four striking features.Firstly, this article attempts some new angles for statements of certain important concepts and draws some new conclusions. For example, credit risk is the result of indirect exchange and the original risk of commodity economy; operational risk is the risk of credit risk management actions; market risk is the general form representation of the credit risk on the macro-level; Although security itself could do little to enhance the repayment capacity of the borrower, but can release the credit risk by the way of reimbursement in which the default party is forced to realize the assets; the income is the present value of the asset, the expenditure is that of the debt, they could be converted to each other through discount coefficient; the definition of a jointly security unit has been given and the features and the inner mechanism of it have also been stated with details.Secondly, this article has proposed the new measurement models for credit risk. This paper started with the term of "breach" and made discussion on two essential factors--- willingness to repayment and capacity of repayment and the latter comes particularly important. On the basis of viewpoints of "debt being the discounting of future income" and "assets can be converted to income for reimbursement", the factors that could affect the ability of the borrower for repayment could be in the turns of revenue, expenditure, assets and liabilities according to their importance. Based on the analysis for these factors, On the basis of four factors, leverage analysis models have been proposed, with the input of other factors like assets and liabilities, the complete set of credit risk measurement models has been initially constructed.Thirdly, the "ring-patterned" model of credit warranty has been put forward. This article has made reviews for those research achievements on the guarantee and warranty theories and proposed the point that warranty effectiveness could be eventually realized through the means of prompting the defaulted parties to make reimbursement of the debts with the result that the defaulted party could be disciplined and the moral risk could be prevented. Otherwise, the defaulted behavior would be "encouraged"; furthermore, this thesis made analysis on the relationship between the effectiveness and the scale of those inner mechanisms like the filtering of warranty customers, audition, information findings and steering repayment and so on. With the practice of rural credit cooperatives in Dezhou, the "ring-patterned" credit guarantee model has be promoted, that is, the borrower makes mortgage with its own assets (or provides anti-guarantees)â†'tight security should be supplied by the security group members in those category communitiesâ†'loose security would be supplied by the members in large security units, that is, the security model with gradually decreased degree of liabilities from the inner to outsider should be employed.Fourthly, more practical solutions should be proposed. On the basis of analysis on the credit risk management of rural credit cooperatives in Dezhou city and together with the relative research achievements, some suggestions and solutions that would be fit for the practical conditions in the rural credit cooperatives have been put forward in this thesis.