Stress Test On Credit Card Loan Quality And Regulatory Measures

This paper do stress testing on credit card loans. Non-performing loan ratio isselected as the indicator of loan quality. There is three factors impactingnon-performing loans of credit card.They are macroeconomic factors, bankmanagement and the situation of the cardholder. This paper builds model by structuralequation modeling and underlies assumptions. Through survey to staff of riskdepartment,company business department,customer department,credit department andcredit card center, the paper measures if these three aspects significantly impact badloans of credit card. The fitness index including,χ2/df, RMR, RMSEA, GFI, NFI, IFI&CFI were2.502,0.058，0.078，0.890，0.915，0.959，0.956.The index values are betterthan the recommended value.This is a high goodness of fit. The coefficient ofmacro-economic factors is-0.176(P <0.05),which means that macroeconomic factorssignificantly impact non-performing loans of credit card at0.05level. The coefficientof bank management is-0.670(P <0.01),which means that bank managementsignificantly impact non-performing loans of credit card at0.01level. The coefficientof situation of the cardholder is-0.195(P＞0.05）,which means that the situation ofcardholder has no significant effect on credit card non-performing loans.The paper selects Merchants Bank credit card loans as the object.By usingsemi-annual data of2006to2010,the paper do stress testing on the relationship betweenGDP growth,Customer Price Index,Disposable Income growth and non-performingloan ratio.The result shows that, The coefficient of GDP growth is-0.254240（P＜0.01）,the coefficient of Customer Price Index is0.000497（P＜0.01）,the coefficient of Disposable Income growth is0.037429（P＞0.05）,the coefficient of lagged non-performing loan ratio is-0.067570（P＞0.05）.These data mean that GDP growth and Customer Price Indexhave significant impact on non-performing loan ratio of Merchants Bank credit card at0.01level,while disposable income growth and lagged non-performing loan ratiodon’t have significant effect on non-performing loan ratio of Merchants Bank creditcard. Exclude disposable income growth and lagged non-performing loan ratio and doregression again, the coefficient of GDP growth is-0.219713(P <0.01), the coefficient of Customer Price Index is0.000481(P <0.01).By setting the historical scenario andassumed scenario, this study obtains the non-performing loan ratios of ChinaMerchants Bank credit card under the two scenarios.In the end,the paper proposes some regulatory measures on credit riskmanagement of credit card.