An Attempt Research On Loan Pricing For China Commercial Banks

After World War Ⅱ especially since1980s, marketization, whether in western or eastern countries, is deemed as a main part of economic system reforms, among which market-oriented interest is a significant part. After interest rate marketization, commercial banks confront an issue of pricing loan interest rate on their own. Long interest rate control in China leads to lack of experiences in pricing loan interest rate by commercial banks. Chinese commercial banks are facing huge challenges because of speedy interest rate marketization process and opening up of banks. In front of these challenges, China commercial banks must actively explore and build up a scientific and suitable loan interest rate pricing mode through learning from advanced international experiences and combining their own situations. Under such a context, this paper aims to explore a loan interest rate pricing method suitable for China commercial banks by analyzing international practices and current factors influencing the pricing of China loan interest rate.Firstly this paper introduces basic theories of loan pricing, pricing principles and basic factors influencing pricing. Secondly it analyzes the status quo of pricing and existing problems in Chinese commercial banks and elaborates on how market-oriented interest influences upon Chinese commercial banks. After that it introduces and analyzes pricing models in international commercial banks:cost-plus pricing model, price leadership model, client profitability analysis model. Then based on the above analysis, the paper attempts to explore a pricing model which prices loans based on clients’ credit risk and makes adjustment based on "bank-client" general relationship. Finally in hopes of enhancing the effectiveness of loan pricing, this paper puts forward a series of proposals targeting current pricing situations in Chinese commercial banks during transformation period.