Research On Credit Risk Management Of Chinese Small And Medium Sized Commercial Bank

With the reform of financial system, China’s small and medium-sized commercial banks keep innovating and developing rapidly. Currently, as China’s banking system is an indispensable part of small and medium-sized commercial banks, it became an important part of China’s economic development. With the establishment and development of small and medium-sized commercial banks, China’s commercial banks have broken the monopoly under the planned economy system. Therefore, the competition mechanism of China’s banking system is formed and the level of competition has risen, along with the commercial bank service level, service quality and work efficiency, has been improved.The bank management risk includes credit risk, market risk, off-balance-sheet risk, interest rate risk, Technical and operational risk, Country risk and so on. As the financial market become mature, the emergence of various derivatives, credit risk has become one of the most important risks in financial markets. According to a study conducted by the Bank of the World on international banking crisis analysis, credit risk is the cause of bank failures, which cannot be ignored. Since the1970s or1980s, the environment financial institutions are facing is getting more complicated. The promotion of economic globalization makes the financial market tend to be liberal. The financial derivatives, with the whole financial market, become indispensable financial tools, and the competition is increasing year by year. In addition to credit risk, other risks also came out, but the credit risk in the small and medium-sized commercial banks did not decline,instead, it leads to credit risk and market risk becomes the main target and the core content of risk management of financial institutions and regulators. Especially since the nineteen nineties, after a series of global financial crisis, the diversification of financial products made the single asset supervision unable to meet the financial market regulatory requirements. However, frequently using of financial portfolio in financial market makes supervision and management of risk portfolio stricter.China is in economic transition period, financial risks are accumulating and diversified, especially the credit risk. In2007, American mortgage crisis triggered the global financial crisis, made us began to rethink the bank risk management, and lift it to a higher level."The new Basel Capital Accord" divided the risks we are facing into credit risk, market risk and operational risk by commercial bank. According to the current financial environment in China, the credit risk is the main risk for commercial bank; the losses are more than80%in overall commercial Banks risks. Therefore, to solve the credit risk in commercial bank management is the priority among priorities, it also related to the future of the development of commercial banks success. But compared with developed countries, commercial banks’credit risk management in China has always lagged behind. In addition, the capital market in China is weak, commercial banks’ income are mainly rely on loan interest, once the credit has crisis, repayment not made timely, it affect the survival and development of the whole bank, what is more, may affect the development of national economy. Therefore, credit risk management has become an important component of China commercial banks’ credit management.Based on the above reasons, this paper mainly focuses on analyzing the current situation of credit risk management and the existing problem of the small and medium-sized commercial banks in China, and the existing problems. It are based on the analysis of the external environment and internal system; providing some countermeasures and suggestions to help improve the credit risk management of small and medium-sized commercial banks in China.In the first part of this paper, it introduces the research background and significance; current research statues around the world; also, the ideas and research methods as well as innovations of this paper. The second part mainly focuses on the credit risk associated with the theory of credit risk management. And detailed introduces the existing measurement model, and new Basel accord on credit risk management requirement, which lays the theoretical foundation of this paper. The third part is the main focus of this study, which discusses the current situation of our small commercial bank credit risk management and the existing problems. Thispart is analyzing the current situation from four aspects. The existing problems are analyzed from two aspects:the external market environment and internal management. The fourth part is the empirical research, mainly analysis of the credit management in banks of Chongqing. The fifth part is providing suggestions for the existing small and medium-sized commercial banks’ problems mentioned earlier, it was also analyzed from the two aspects:external environment and the internal management. The last part is conclusion.There are plenty of definitions for credit risk, but it mainly refers to the credit risk, such as loan contract breach. At present, the credit business is still the main part of the business in commercial banks of China, the bank loan interest takes up to90%or more of the total bank income. In view of this phenomenon, this paper focuses more on the narrow definition of Chinese medium and small commercial banks credit risk. Although with the rapid development of economy, the proportion of individual credit in the banking business is also increasing, but for the whole banking system, corporate credit is still the most important banking sources, therefore, the credit risk of commercial banks are mainly from the enterprise credit breach. The customers mentioned in this paper are mainly refers to enterprise customers. The method, system and suggestions are also mainly for enterprise’s credit.