Credit Risk Management Of Commercial Banks

Enterprise groups emerged in century American and European industrialized countries in the early20th. With China’s rapid economic development and financial market continuing to promote, the development of enterprise groups is very rapid. Cross-industry enterprise groups emerged one after another. These groups not only are the important forces supporting the economic development, but also the objected customers of bank. In practice, the transactions between associated enterprises had posed a great threat to bank loans’security. Facing the complex relationships between various types of associated enterprises, commercial banks need to improve credit risk management skills urgently.At present, the commercial banks have realized the importance to strengthen credit risk management of enterprise groups, but failed to pay sufficient attention to the risk of the related party transactions of the group companies and take effective measures to control this kind of special risk. Transaction risks associated with the enterprise group have been throughout the entire credit process.It is source of the credit risk. Therefore, studying how to control the related party transactions of enterprise groups credit risk is of great importance.The paper has seven parts. The first part is an introduction, the main topics of this paper to clarify the background and significance. The research starts with the credit objects-Enterprise Groups, and then turns to the perspective of the commercial banks, analyzing the current credit risk management problems, proposing specific solutions. The second part is the literature review and summary of the domestic and foreign credit risk management measures of enterprise groups. We summarize the credit risk performance of enterprise groups, review the current methods of credit risk control methods.The third part of the research has made a definition of enterprise groups, summarizing the risk of several types of customers of the Group. In this paper, we particularly analyze several types of vulnerable customers. Commercial banks should pay much more attention to them. The fourth part is the analysis of current problems of risk management. The fourth section describes the credit process of commercial banks, pointing out the defects of the credit process, including information systems, inadequate credit survey, failing to distinguish the complex relationship, ignoring related party transactions credit risk. The fifth part is the identification method of associated transactions inside the enterprise groups, mainly through the analysis of the relevant accounts, getting access to business related to accounting and business information, to determine whether it has association transactions. Part Ⅵ and Part Ⅶ proposed improvement measures followed by credit process. Credit risk management before loan is the key to the whole credit management, involving banks’decisions to lend money to the enterprise group.This paper is based on the basic characteristics of enterprise groups, analyzing the sources of the special risks of enterprise groups and the current credit risk management problems. Learning from foreign experience, we raise specific measures of enterprise credit risk management followed by credit process.