China's Commercial Banks Of Small And Medium-sized Enterprise Credit Guarantee Loan Risk Research

With the development of economy, small and medium enterprises (SMEs) become more and more important. SMEs, which distribut wide in all areas of national economy, are an important force to promote economic growth and development, and SMEs creat a large number of employment opportunities. SMEs have a vital role in increasing tax revenue and promoting technological innovation and export. However, China’s SME are small in capital and scale, the lack of good credit records and information transparency, limited in capacity to bear legal responsibility, imperfect in building institution, not standardized in management, resulting in very difficultly financing. One effective way to cope with this problem is to establish credit guarantee system of SMEs which puts up a bridge between SMEs and banks or other financial institutions.What is more, as China’s financial situation continues to change, the operating environment of the commercial banks are also facing many problems:financial disintermediation and the marketing of the interest rate are shrinking the profit margin of the banks and affecting the future sustainable development of the commercial banks. Therefore, strengthening credit research of SMEs, adjusting the structure of bank loans and increasing the proportion of the SMEs loan are very urgent topics, regardless of the healthy development of bank business and the coping with the problem of difficultly financing. China’s credit guarantee system has been basically established, so SME financing problem has relieved under the participation of credit guarantee institutions. And commercial banks transfer part of the loan risks, which will enable commercial banks to have a desire to provide loans for SMEs, and benefit the development of commercial banks because of extended loans.Although under the credit guarantee, the risk of commercial banks declined sharply, especially the borrower’s credit risk reduction, but the banks do not fully diversify risk. Loan themselves and credit guarantee agencies can give commercial banks the loss, so potential risks remain. For example, in the loans under, the borrower may still be unable to repay the mature loan, or intentionally fails to repay the loan, which cause credit risk and loan default, so the credit guarantee agencies have to bear the compensation responsibility. Although banks can get loans from the credit guarantee agencies, but on the one hand the guarantee agencies may be difficult in continuing operations, and banks can’t recover loans to form bad loans, on the other hand, even if recovering their loans, banks have to take some time and opportunity costs. Guarantor may not have secured guarantee qualification or the ability which provides high risk security guarantees, resulting in bank loans may not be recoverable, so such guarantees exist in name only. Banks don’t verify the authenticity of signature and stamp. These result in significant operational risks.This paper firstly discusses the theories of credit guarantees which explain the appearance of credit guarantees. Based on the theories, it analyzes financing role of credit guarantee for SMEs. Then it analyzes three types of risk and causes of these risk, namely credit risk, operational risk and guarantee agencies risk. Finally, according to these different risks, combined with the practice of credit guarantees, it raises risk prevention measures and recommendations for commercial banks, and focuses on corresponding preventive measures for the risk of guarantee agencies. These measures should encourage commercial banks to cope with risk prudently, strengthen risk management.Developing SMEs credit business has become important content of commercial banks’customer structure and asset adjustment. The risk management is increasingly important. SME credit business under guarantee agencies is emerging, growing and the increasingly vital in SME credit. Its risk management theory and practice is an important area that can not be ignored. This paper discusses the important role of the credit guarantee system in financing SMEs, commercial banks under the SME credit guarantee loan business is of great significance, and focus on possible risks of commercial banks under the credit guarantee, as well as those risks preventive measures to look forward to provide reference for the risk management of commercial banks.