Research On The Rural Banks' Credit Risk Management Based On The Theory Of Adverse Selection

Rural Bank provides services to farmers and small rural enterprises.Rural bank encounters severe adverse selection due to its special customers and environment.Adverse selection leads to rural bank's credit risk.Strengthening the pre-loan investigation reduces adverse selection,which will contribute to reduce the rural bank's credit risk.Reducing the rural bank's credit risk to promote its healthy and sustainable development and play its functions of servicing rural areas.Therefore,this article researches on how to reduce adverse selection before giving loans to prevent the rural bank 's credit risk.First of all,this paper analyzes the characteristics and the generative mechanism of rural bank's credit risk.The principal-agent relationship between rural bank and customer in the credit market leads to the rural bank's adverse selection that results to credit risk.Secondly,the paper puts forward "soft information" that reflects the borrower's ability and character to provide important basis on lending decisions,which also can make up the insufficient of hard information.Next,construct decision model of intuitionistic fuzzy sets of soft based on the borrower's "soft information" in order to provide gist to rural bank's lending decision.Then,this paper analysis the agent's private information--"soft information" and applies signaling model of information economics to build the imperfect information dynamic game model of rural bank and the customer.The social capital on behalf of the borrower's "soft information" can serve as a signal transfer the borrower's risk type to rural bank.The model's Bayesian equilibrium can be derived by signaling model.Gain the separating equilibrium by adjusting the variable in order to distinguish the type of the borrower's risk.Applying screening model on condition that the participation constraints and incentive compatibility constraints are met to get an equilibrium.The equilibrium can help rural bank design a contract consist of loan rate and social capital to distinguish the borrower.Finally,in the perspective of rural bank and the borrower,this paper proposes some recommendations to reduce adverse selection and prevent the credit risk.This paper made the following research work: First,the paper studies theprincipal-agent relation and its peculiarity of rural bank's credit behavior.The agency relationship gives rise to adverse selection.Reducing the adverse selection contributes to reduce the credit risk.Second,put forward the decision method of intuitionistic fuzzy soft set based on the borrower's "soft information" to provide important basis on lending decisions.Third,apply signaling and screening model of the economics of information to derive the separating equilibrium in order that rural bank can distinguish the borrower and reduce adverse selection.Fourth,use the theory of institutional economics to propose some recommendations to reduce adverse selection and prevent the credit risk.