A Study On The Value Assessment And Disposal Of Non-performing Assets Of Commercial Banks

The non-performing assets of commercial banks is one of the main causes to economic crisis. Currently, both the rate and quantity of non-performing assets of commercial banks are on the rise. Addressing the problem of non-performing assets is a critical challenge facing Chinese commercial banks, for it can severely restrict economic growth and improvement of the banking industry in China. Therefore,evaluation and effective management of non-performing assets have become obstacles in building more efficient commercial banks, making them both top priorities for Chinese commercial banks. The disposal of non-performing assets will directly mitigate financial risks by decreasing the ratio of non-performing assets in commercial banks. It will in turn facilitates the reformation of financial system in China, and raises Chinese commercial banks’ competitiveness in the global market,which can definitely benefit the banking industry and national economy. After the disposal of non-performing assets, there will be a dramatic improvement in the quality of bank’s credit funds, which can effectively reduce risk for banks and increase liquidity. In the meantime, it further supports banks’ development and general socioeconomic growth.This paper firstly introduces concepts of valuation and disposal of non-performing assets in commercial banks. Secondly, against the rising amount of non-performing loans in Chinese commercial banks, this paper will analyze their categories and disposal methods employed by commercial banks. Based on the five level classification of assets, this paper discusses the value evaluation and disposal methods of the lesser degree of the secondary non-performing assets. The purpose is to reduce losses of assets and to revitalize non-performing assets. Thirdly, the upward trend in special-mentioned loans is analyzed, and countermeasures of risk prevention and control are put forward to avoid its conversion into secondary non-performing assets. Finally, this paper discusses the disposal methods of serious doubtful and loss of non-performing assets. The valuation of non-performing assets is an important link in the disposal process of the doubtful and loss of non-performing assets. The papersconducts a case study on the use of the liquidation method as a reference for the disposal of non-performing assets. The paper also studies methods of preventing the degradation from secondary non-performing assets to more serious doubtful and loss of non-performing assets.It is found that more often than not, commercial banks seek to dispose secondary non-performing assets by themselves, while delivering more deteriorated doubtful and loss of non-performing assets to professional asset management companies for disposal and revitalization, in the attempt to minimize losses.