Study Of The Problems Of Rural Commercial Bank’s Bad Loans

Our rural financial reform has made great achievements since the reform and opening-up 30 years ago. However, it is still the weak link in the whole financial system. The farmers’ income is low, the financial supply is short, the siphonage is serious,. All the situation leads to the lack of rural financial resources and services. As a pillar of the rural financial system, the rural credit cooperatives mainly face to the rural areas, but during these years, with the changes of the rural situation and the business model of credit cooperatives, some credit cooperatives have lost its meaning of policy orientation. In some economically developed and cities and countryside areas which have higher level,in order to improve rural financial system, the government began to transform the rural credit cooperatives into rural commercial bank. For example, the Rural Credit Cooperative of Chengdu was transformed to Chengdu Rural Commercial Bank in the year of 2010. After the reform, the bad loans of the rural commercial bank are getting less, but they are still on the highest level among all the commercial banks. Reducing the bad loans has become the key and important work to prevent and defuse the risk of rural commercial bank, meanwhile, it is also the key point of improving the benefit of management.Rural commercial bank is a local financial institution.It consists of the farmers, rural industrial and commercial individuals, companies and other economic organizations which have the stock of the bank.In some economically developed and cities and countryside areas which have higher level, the concept of "agriculture, countryside and farmers" has changed a lot. Agricultural proportion is very low,it is even below 5% in these areas. As the main customer of rural credit cooperatives,although the farmers’ status hasn’t been change, most of them are no longer working for traditional agricultural production, their requirement for agriculture is getting small, actually, the credit cooperative has already operated as commercial model. Therefore, our country transformed the rural credit cooperatives into rural commercial banks which have modern share-holding system in those areas.The same as the common commercial banks, the rural commercial bank should pay attention to the problem of bad loans and try to avoid and solve the risk of bad loans in time to avoid the bad effects which might be brought to the bank. The author made a wide research about the problem of bad loans in rural commercial bank by using the the theory and own experience, especially did some research on the solution for rural commercial bank’s bad loans in Chengdu.It has the following content:Chapter One was an introduction to this thesis. It introduced the background of research, and the meaning, the direction and purpose, methods, the innovation and the space to improve of this paper. China has more and more involved in the world economic system, the research of the Chinese economic and financial problems can not be restricted to domestic background analysis and consideration, we must also pay attention to both the domestic and international environment. Therefore,this article inspected the research background from many aspects. In order to make it clearly, this paper adopted many ways of research methods.This chapter also presented the research theory, and defined the key conceptions. The author made detailed description about the definition of the bad loans, main used the international "Five Categories of Classification" to define the type of loans.The subprime loan, the doubtful loan and the loss loans are called bad loans. This chapter made a brief introduction and comment about the problem of the domestic bad banks’ bad loans.Chapter Two analyzed the influence of the rural commercial banks’bad loans. The risk caused by bad loans is including internal and external influence. Internal influence is divided into three sectors.Bad loans affected the profit of bank, it reduces the profit of bank capital; Bad loans of bank capital slow down the recovery of the capital and cause the liquidity risk of bank; Bad loans cause the lost of the assets and profits of bank which affect the solvency of banks. As to the analysis of the external influence, the author started from the.The bad loans intensifies the fragility of the bank system.It’s easier to bring the bank crisis, and even causes the financial crisis.Chapter Three analyzed the reasons why the bad loans of rural commercial bank occurred. The analysis of the external reasons included:the rural commercial banks were restructured by the rural credit cooperatives, they inherited the history appendage of rural credit cooperatives; they also affected by the national industrial policy adjustment. Some small and medium-sized companies were shut down, they became the reason of bad loans.Meanwhile, there is a very important external reason that we have poor credit environment and related legal system.At the same time, lack of financial regulation also is a reason that can’t be ignored. The internal reasons of rural commercial bank mainly included the imperfection of the bank governance structure,the lack of the investigation and management of loans and the failing system of internal control.Chapter Four analyzed the solution of the bad loans of rural commercial bank This part introduced several different ways, such as signing a contract for the responsibility of bad loan’s management, the concentrated litigation,,asset securitization processing, selling to asset management company, signing a contract of assets management,assets restructuring, etc. These ways have already existed to solve bad loans from the situation of banks.Chapter Five analyzed how to control the occurrence of bad loans of the rural commercial bank. In fact, the best way to solve the bad loans is to control the source of bad loans. The author mainly wrote from the angle of the bank to analyze how to control and manage the loan risk to reduce the occurrence of bad loans. Such as establishing a more professional bank management system, improving credit business process of the bank,sending the risk directors to areas,establishing the center of approval in the area, strengthening the measures of guarantee, perfecting the system of evaluation, etc. Meanwhile,banks also need to establish analysis system of risk and early warning mechanism for the different kinds of loans to control the post-lending effectively.