The Research On Loan Pricing For SEs Based On RAROC Model

Small-sized enterprises (SEs) are now playing an increasing important role in our economy, their inadequancy of financing is widely focused since2011. Thanks to the guidence of government, more and more banks are willing to provide loans to SEs. Therefore, how to price reasonably for SEs’loans becomes an urgent problem faced by banks.I sumed the theoretical and practical literatures about loan pricing at first and discovers that the RAROC (Risk Adjusted Return on Capital) model is widely used in interational financial business. The model itself has much strength and it will be the trend of Chinese commercial banks’loan pricing. Meanwhile, with China’s market-oriented interest rate reform going on deeply and new Basel being taken in China, the banks of China will be able to use RAROC model, so I chose RAROC model to analyze.Firstly I analized the history, development, present condition and problems of loan pricing methods in China. Then introduced the RAROC model theoretially and analized the feasibility of RAROC model taken in China practically. Then I used SPSS to make an empirical analysis on the validity and applicability of RAROC model. I randomly selected125samples of defaulted loans and300samples of normal loans for comparative study and made the conclusion that whether defaulted loans or normal loans, the RAROC loan pricing model can more effectively measure the risk of loans and it has some applicability in China. Meanwhile, I demonsrtrated three aspects for improvements of RAROC model:comprehensive customer returns, changes in recent market and other banks’lending rate. Finally, I gave suggestions for taking RAROC model in China, from improvements of internal conditions to constructions of external environment.