Research On Credit Risk Management Of Chinese Commercial Banks Based On Credit Metrics

In December9,2008, The China Banking Regulator Commission(CBRC) announced CommercialBank M&A loan risk management guidelines, and began allowing domestic qualified banks to carry outeligible M&A loan.Since then, M&A Commercial Bank loan risk management guidelines for China’scommercial banks can follow the legal basis on the issue of domestic M&A loan business, which for theacquisition of loans business smoothly laid a foundation. Domestic banks M&A business loans,which canbroaden the financing channels for enterprises to solve the bottlenecks faced with a shortage of funds in thecorporate M&A loan process, to enable enterprises to improve their competitiveness through mergers andacquisitions to enable enterprises to focus on the advantages of resources, and improve the synergy andmore help enterprises to become bigger and stronger, and domestic enterprises into the internationaldevelopment trend.In December2008, China began to provides legal support for mergers and acquisitions business in thecountry still belongs to a new financing business, how to assess the risk in M&A, increasing thelikelihood of a successful acquisition, which are the banks exploring the problem actively. But only theinternational examples, most of the world famous company is through mergers and acquisitions meansgrowing up, so that the business for the domestic enterprise to reform and expand oneself actual strength istempting. However, in the international community, the M&A business will have a specialised investmentbanks to organize and provide professional services, which can be reduce the risk the maximum possibility.The current domestic market, banks are actively planning for the development of M&A loan business, buthave to say on the level of professional services provided by assessment of the target company, M&A riskmeasurement and acquisition capital supervise all aspects have not formed the system of the system.But the acquisition of loans is a new business in our country commercial bank of loans, which has theparticularity of the risk.First of all, the repayment of merger and acquisition loan is based mainly onoperating cash flow in the target company after the merger, so before issuing loans, the banks must have acomprehensive understanding of the target company’s debt situation, the level of profitability, the the stageof development of the industries,as well as national laws and regulations and many other factors. In addition,applying for merger and acquisition loans, the banks should also consider collateral provided by the borrower, and the level of creditworthiness of borrowers and solvency. Due to the longer-term and a hugeamount of M&A loans issued out if there are problems, not only for the loans of commercial banks affecteven have a serious impact on the entire economy. Therefore, effective management of M&A loans, whichis not only related to the overall level of profitability of domestic banks, as well as long-term development ofdomestic enterprises, and even have a particularly important impact on the domestic economy.Beginning of this article described some of the theoretical knowledge about M&A loans, and analyzedthe reasons for the formation of the M&A loan of credit risk, and then discussed the traditional credit riskassessment methods and modern credit risk assessment model to illustrate how to quantify the risk, but alsosummarizes the China’s M&A market development, analysis of credit risk associated with domestic M&Amarket, the general understanding of the problems in China’s M&A loan business.Finally, sum up and draw from the discussion of the development and use of quantitative models ofcredit risk in M&A loans in China’s commercial banks to carry out the status quo on the basis of the analysisand research, selected modern credit risk measurement models Credit Metrics model, combined with Beijingbanks join forces to Bank of China and China construction Bank, the specific case of M&A loan of35billion five-year payment to Beijing State-owned Capital Management Center, on how to strengthen the M&A loan credit risk analysis, quantitative analysis and management in an attempt to China ’s commercial banksmanagement of M&A loan risk to provide a reference framework.The creativity of this paper are, first of all, a systematic analysis of the M&A loan business, and not justan issue for M&A loans; Secondly, this paper adopts the method of combining qualitative analysis withquantitative analysis, the creditmetrics model to learn from nature is used to assess the process of M&A risk,combined with the specific cases of domestic commercial banks M&A loan business in credit risk analysis.