Application Of Customer Value Management In Credit Decision

At present major commercial banks in China set their operational objectives as: abundant capital, superior management, compact organization, healthy growth, perfect image as well as maximized shareholder’s profitability. To some degree, under the circumstances of contemporary credit system and financing background traditional credit business is expected to be the prominence within China’s commercial banks. An overall risk control is definitely the ultimate general aims to take whole-process concrete measures against credit risks, which may hold risks of credit business within a certain scope realizing a maximized capital return.Hereby the author on his years of experiences working in the credit management sector of commercial banks believes that for commercial bank credit decision is a crucial link in the credit risk management process during which quality of credit capital will be influenced greatly. The definition-customer value management provides researchers with a brand new methodology in their credit decision study. Through a large amount of case study the author also found that the application and expansion of customer value management play an unexpected importance in raising profitability. Undoubtedly a scientific credit decision should be based on the clients’ contribution plus quantity analysis on risks and benefits. A reasonable credit plan could on the other hand help bank practitioners obtain more valuable contribution from their clients.A useful tool applied in customer value management is RAROC which concentrates on capital return and illuminates indirect factors like market risks and operational risks. The said revised RAROC’ adapts itself in commercial bank business.The paper targets on the application of customer value management in commercial banks’ credit decisions and takes advantages of current management system and risk evaluation tools in order to establish a new study base-with RAROC to help with the credit decision towards a single client, credit mix as well as performance evaluation in credit business.The paper specifically focuses on:the importance of credit decision in commercial banks’ credit risk control based on introduction of the definition, classification, reasons and management objectives within the scope of commercial banks; the advantages of taking customer value management into credit decision based on analysis on the limits of traditional credit decision; empirical analysis on the application of customer value management based on RAROC model; specific measures in the process of putting customer value management into credit decision, which are proposed according to RAROC practical analysis.