Research On Loan Risk Of Local Government Financing Platform

Local government financing platform which based on local government andsupport by investment and financing institutions, is mainly responsible for thedevelopment of the urban infrastructure and other public projects. In2008, in order toescape the global financial crisis and continue to urbanization, Chinese govermentstrongly supports the development of local government financing platform, and thenmade good results. After that, the financing platform is out of control in the numberand loan volumes to some extents. As a result, local government financing platformhas entered the peak of debt, and faced a huge repayment pressure. The State Councilnoticed that strengthen management of local government financing platform companyin2010, and the CBRC also had begun to study how to conditional delay the loans oflocal government financing platform in2012, but still, the loan risks of financingplatform remain high.Above that, how to deal with the loan risks of the local government financingplatform in the peak debt has become an important problem with wide concern. Firstly,analyze the concept and development process of financing platform companies,research the theoretical basis of loan risk, and make comparision in the characteristics,advantages and disadvantages of KMV, Credit Risk+and Credit Metrics Models,which can value the credit loan risk. Secondly, analyze the debt situations, thepossible causes, the potential consequences and actual cases of local governmentfinancing platform. Through the Credit Metrics model based on VaR, combined withpractical data of two financing platform companies, verify the risk of financingplatform. Finally, raise the strategies of the loan risk supervision and prevention.Based on the characteristics and risk stiuations of local government financingplatform, combine with the practical data to value the risks by appropriatemeasurement model, and propose a series of suggestions to manage loan risk offinancing platform. It’s beneficial to the prevention of local government financingplatform for loan risk, and can promote a healthy development of the localgovernment financing platform.