Study On Credit Risk Management Of Supply Chain Finance Business Of Commercial Banks In China

With the assistance of the core enterprise of supply chain, commercial banks establish contact with the upstream and downstream of small and medium-sized enterprises,through the information acquisition of the relevant enterprises in the supply chain and control of cash flow and logistics, reducing capital risk, commercial banks provide comprehensive financial services to upstream and downstream of small and medium-sized enterprises, that is Supply Chain Finance.In China, the Shenzhen Development Bank officially founded the business brand of Supply Chain Finance on May 18, 2006, originally taking the ‘1+N’ mode of supply chain finance, which implied the beginning of the development of business of supply chain finance. At present, many commercial banks have already carried out the business of Supply Chain Finance, such as Guangdong Development Bank, China Citic Bank, Pudong Development Bank, Industrial Bank, China Merchants Bank, Bank of Communications and so on. And business of Supply Chain Finance mainly focus on nine industries, which are Coal, Automobile, Steel, Petrochemical, Household Appliances, Transportation, Engineering Machinery, Medical Equipment and Non-ferrous Metal. Its development shows a good momentum. But in the process of carrying out this business, credit risk is the main risk with which commercial banks are faced, for the credit objects are mainly upstream and downstream of small and medium-sized enterprises. In view of various participation bodies and numerous source of risks, establishing suitable credit risk management system of Supply Chain Finance is crucial to commercial banks.Management of credit risk mainly involves three phases, which are recognition,measurement and prevention. Firstly, identification of credit risk of Supply Chain Finance are carried out mainly around three business models: credit risk identification of accounts receivable financing mode, credit risk identification of prepayments financing mode and credit risk identification of inventory financing mode. Secondly,after identifying main sources of credit risk with which commercial banks are faced when carrying out the business, accurate measurement of influence degree of mainsources of credit risk is the premise that commercial banks can prevent credit risk targetedlly. However, layouts of various supply chains are different, the influence degree of main factors of credit risk can not be treated as the same. In view of existing research mainly concentrating in industries of Steel, Automotive,Non-ferrous Metals and Household Appliances, in order to complement the existing researches, this paper performs the measurement of credit risk of Construction Machinery industry with the help of Logistic Model. It is concluded that the profit ability of financing enterprises and debt paying ability of core enterprise are the most important factors affecting the probability of credit risk of Construction Machinery industry. Finally, this paper puts forward comprehensive advice of risk prevention mainly from two aspects which are reinforcement of ‘software’ environment and construction of ‘hardware’ environment for commercial banks. Reinforcement of‘software’ environment mainly includes enhancement of establishing electronic information sharing platform, improving the execution efficiency of relevant laws and regulations and playing risk transfer function of credit insurance and financial derivative products. Construction of ‘hardware’ environment are setting up the threshold of core enterprise access, increasing the requirements of credit rating on the logistics enterprises, strengthening the credit training and improving the risk warning system of commercial banks.