Risks Of Chinese Commercial Banks’ Residential Mortgage In The Post-subprime-crisis Era With Huaxia Bank As An Example

The boom in the real estate market has given an impetus to the development in the realestate finance in China. Personal housing loans help citizens to purchase their dream housesand commercial banks to make profits. As the real estate market has been subject toadjustments, the personal housing loans, which are always been deemed as assets of highquality, will suffer high risks. There exist many problems in Chinese personal housing loansmarket, such as excessive reliance on bank loans, inability to transfer risks through secondarymarket, and information asymmetry and so forth. The subprime crisis originated from theAmerica has damaged the financial market and the economy a lot across the whole world. Thevery crisis shall serve as a reminder for us to deal with the above-mentioned risks andproblems as soon as possible to avoid such a disaster, which is the main purpose of this essay.Foreign studies concentrate on the quantitative analysis of subprime mortgage and credit risk,which is based on econometric models. National studies otherwise usually focus on theadvanced theories and mechanisms from the west and conduct a qualitative analysis. Thereexist little studies discussing how to defense against the crisis and risks from the perspectiveof theory and practice, law and economy based on the national conditions of China. Againstthe American subprime crisis, the essay tends to reveal the causes based on the comparisonbetween China and American. Finance and law, theory and practice, induction and deductionare combined to gain such an end. Based on the current conditions of Chinese commercialbanks personal housing loans and the real estate market, Huaxia Bank and the “falsemortgage” case are taken as examples to summarize the risks and put forward propersuggestions.This essay shall be divided into five parts. The first part deals with background, purpose,importance of the theme, and studies the causes and measures concerning the crisis, andintroduces the qualitative/quantitative analysis of the personal housing loans. The writingmethods and possible creativity are discussed as well. The second part discuss in depth themeaning and drivers of subprime mortgage. The third part revolves around the meaning,categories, characters of personal housing loans and relevant four kinds of risks. The fourth part introduces the risks faced by Huaxia Bank and relevant measures. An example of falsemortgage is used to usher the discussion of credit risk management. The last part offers propersuggestions to help the banks to guard against risks and the country against thecrisis.China and American have many similarities in fluctuation of interests, real estate bubbles,and low personal housing loans threshold. Chinese commercial banks do not performexcellently in terms of risk management against credit risk, market risk, liquidity risk andoperating risk. There exist many problems such as imperfect internal control system, andimperfect personal credit system and so forth. To solve the above mentioned problems, theChinese government shall enforce the macro-management to usher the healthy growth in thereal estate market and prudent development in personal housing loans. At the same time, weshall boost the development of personal credit system and personal housing loanssecuritization system. It is a necessity to perfect the national law and enforce the internalcontrol of banks to realize the continuous and healthy growth in Chinese real estate marketand personal housing loan market.