On Government Supervision And Control Of Credit Risk Over Foreign Banks And Solutions To The Issues

Ever since the reform and opening up, the development of foreign banks has made qualitative leaps in China. Therefore, foreign banks have become a force to be reckoned with Chinese banking business. At present, credit business is the main income of foreign banks, the risks of which are the major risks that the foreign banks are faced to. With the rapid development of capital-market integration and financial innovation, the supervision over foreign banks is becoming increasing difficult. As a result, it is far from sufficient for the traditional supervision system to cope with complicated banking business. Since the supervision system over foreign capitals has been established for a short time, with the weak base of government monitoring, lacking of internal control mechanism and risk precautions. Consequently, the way that the government supervise and control the foreign banks in China plays a particularly important role in stabilizing our national economic security. This paper will analyze the reason for bad loan by studying the risk management of bad loan in foreign banks in China, to conclude that how the supervision institutions should reinforce the supervision over financial institutions; at the same time, this paper will discuss whether the domestic supervision institutions should learn from some practices of supervising foreign banks in western countries.Based on credit risk management theory, the paper studies the government supervision over preventing and controlling the credit risk of foreign banks in domestic market through social researches, such as document investigation, case analysis and so on. The paper studies the problems that exist when BEA is supervised in credit risks by the government, from five aspects: laws and regulations, daily supervision, technical supervision, special supervision and credit supervision. For example, the relevant legislation is not perfect; the daily supervision is not sufficient; there is no law established specially for foreign banks; the technical supervision is out-of-date; the deficiency of credit supervision over the foreign banks is also a problem. Since the admittance time for foreign banks is short and the relevant precautions of the risk supervision are immature, the paper aims to find out the suitable way of improving and reinforce the domestic supervision over the credit loan in foreign banks by learning from the international practices abroad of credit loan supervision over foreign banks. For example, we could perfect the law of government supervision over foreign countries; improve the supervisory approaches to get the government's attention; establish special supervision over the foreign banks which is based on the specificity of foreign banks; perfect the laws for Internet banking in order to improve the technical supervision; effectively implement the training for banking staffs to strengthen the credit supervision. In this way, the supervision and control of credit risks over foreign banks will be perfected and reinforced. Therefore, these solutions not only ensure foreign banks can fully play their active roles in domestic economic and reduce their negative impacts in the domestic banking, but also ensure the domestic finance can develop stably.