Empirical Analysis Of Risk Pricing Of A Commercial Bank Loan

With the rapid development of China's economy,China's banking industry has developed rapidly.A large number of new banks,foreign-funded banks and other financial institutions have been established in China.The competition among domestic banks has become increasingly fierce.At present,the bank is an industry with risk management and also a fund intermediary with the purpose of making profits.Its main source of profit is the spread of deposits and loans.To obtain a reasonable return on capital,banks must draw enough from the loan proceeds.The bad debts are prepared to offset expected losses and unexpected losses.Loan pricing is a comprehensive consideration of the loan interest rate determined by the commercial bank based on its own loan risk,capital cost,loan cost and profit target,combined with market capital supply and demand and the cooperative relationship with customers.Reasonable loan pricing will implement the concept of “risk compensation” throughout the entire credit approval and management process to ensure that the loan proceeds make up for the withdrawal of bad debts,and at the same time establish a stable and effective capital replenishment mechanism to enhance the core competitiveness of the bank.At this stage,China's small and medium-sized commercial banks basically adopt the benchmark interest rate pricing method as their own pricing strategy.The benchmark interest rate pricing method,which is based on the benchmark interest rate determined by the People's Bank of China and on the possible default risk of loans.The loan interest rate is set by adding points,and the possible default losses are covered by interest rate gains.This kind of loan pricing model can,to some extent,improve the ability of small and medium-sized commercial banks to resist against default losses.However,in the specific business operations of commercial banks,the degree of credit risk of customers is not exactly the same as the point of increase in interest rate risk,and there is a certain bias in loan pricing.This article compares the actual interest rate of 6-month to 1-year short-term working capital loans issued by A branch of commercial bank B from 2008 to 2016 and the actual credit risk of customers.Because they belong to the same financial institution,the loan pricing factors such as the cost of capital,loan expenses,profit targets of financial institutions,business terms,business types,etc.are excluded.According to the established risk assessment model,the risk assessment of the loan business is conducted,and the relationship between the actual credit risk and the customer loan interest rate is analyzed based on the quantified value after evaluation.The analysis focuses on the causes of high interest rates for high-risk customers with low interest rates and low-risk customers,and proposes reasonable suggestions for these issues so as to provide the reference significance for improving the accuracy of commercial bank loan risk pricing and improving the competitiveness of small and medium-sized commercial banks.