Empirical Analysis On Loan Pricing Of Bank In China

Loan pricing of commercial banks is a process to determine the loan interest rates, it is basedon their own cost of funds, loan expenses, loan risk and profit goals, it is also combined with thesupply and demand situation of market. Reasonable loan pricing will make commercial banks adaptto the environment of financial internationalization and liberalization of interest rate. In July,2013,China realized full liberalization of lending rates, banks have come into a new stage of loan pricingindependently. This paper attempts to discuss pricing of bank loans upon loan pricing methods inwestern bank and China’s present situation of loan pricing.At present, price leadership is the most common method of loan pricing in China, it is formedby the benchmark interest rate and floating spread. Because the benchmark interest rate is usuallyspecified by the authority, the main task of loan pricing is to determine a floating spread. This paperuses the listed companies in Shanghai and Shenzhen securities exchange from2007to2012as asample, analyses floating spread pricing of foreign currency LIBOR loans.The analysis results show that:(1) the enterprises’ financial and operating conditions cangreatly affect the determination of foreign currency loans floating spread, the better the businessfinancial conditions is, the lower loans floating spread level will be;(2) the duration of loan canaffect the foreign currency loans floating spread, the longer the duration is, the higher foreigncurrency loans floating spread will be;(3) mortgage and pledge setted have significant influence onthe foreign currency loans floating spread, the higher proportion of mortgaged, pledged assets is,the lower loans floating spread is;(4) domestic banks and foreign banks have significant differencein determining the floating spread, foreign banks pay more attention to the financial information.The last part of this paper is the empirical results summarized and suggestions.