Just in time for our latest homework... 1. Overview of commercial bank credit risks The types of credit risks can be generally divided into two categories: market risks and non-market risks. Market risks mainly come from the production and sales risks of the enterprise (borrower) (that is, the risks caused by changes in market conditions and production technology and other factors during the production and sales process of the borrower's goods; non-market risks mainly refer to natural and social risks). Risk. Natural risk refers to the risk that the borrower will suffer economic losses and be unable to repay the credit principal and interest due to natural factors; social risk refers to the prevention of credit risks caused by individuals or groups in society, mainly bad credit. There is a famous saying in the credit manual of the Industrial and Commercial Bank of China: "No matter how high the interest we charge, it will be difficult to make up for the loss of credit principal!" In 2002, my country fully implemented a five-level credit classification system. This system is based on the degree of credit risk. Bank credit assets are divided into five categories: normal, special mention, substandard, doubtful, and loss. Bad credit mainly refers to substandard, doubtful, and loss credit. Bank credit risk refers to the impact of various uncertain factors on banks. In the process of operation and management, if the actual income results deviate from the expected income target, there is a possibility of asset losses. Credit risk refers to the possibility that the borrowing enterprise cannot repay the credit principal and interest on time due to various reasons and the bank funds will suffer losses. Credit business accounts for a large proportion of bank credit business. Credit has the characteristics of high risks and outstanding returns, and is of great significance to the operation of the entire bank. Therefore, it is of great significance to study credit risks of commercial banks: ( 1) Objectivity As long as there are credit activities, credit risks exist objectively regardless of human will. To be precise, risk-free credit activities do not exist at all in actual banking work. (2) Hidden credit. The inherent uncertainty of losses is likely to be concealed by its appearance. The loss of bank funds caused by the occurrence of credit risks not only affects the bank's own survival and development, but also causes a chain reaction. 3) Controllability means that banks can identify and predict risks beforehand, prevent them during the event, and resolve them afterwards according to certain methods and systems. 2. Main risks and countermeasures of commercial bank credit 1. Operational risk 1) The concept of operational risk: The fulfillment of the commitment to enter the market has made my country's financial market more open to the outside world, and local commercial banks are facing more intense competition, which has put forward higher requirements for the risk management of commercial banks. However, due to the lack of property rights and internal control mechanisms of local commercial banks, , operational risks caused by factors such as improper process design have become increasingly prominent. According to the definition given by the Basel Committee in paragraph 1 of the Agreement, operational risk refers to the risk of losses caused by imperfect or problematic internal procedures, personnel and systems, or external events. Operational risk can be further divided into two categories based on risk causes. One is operational failure or error risk, including personnel risk, process risk and technical risk, etc. The other is operational strategy risk, which refers to the risk of operational failure or error when responding to external events or the external environment. Such as politics, taxation, supervision, government, society, market competition, etc., the risk of losses due to inappropriate strategies. The former is mainly related to internal control efficiency or management quality, also known as internal risk; the latter is mainly related to external events, also known as external events or external dependency risks. 2) Operational risk management countermeasures and suggested methods to solve operational risk. According to the new agreement, there are three main types: basic indicators, standard method and internal model method. The core is to allocate capital according to different risk weights. However, for my country's commercial banks, due to the difficulty in collecting data on personal housing credit operational risks and the short time for business development, it is basically impossible to use statistical methods and information simulation. The unpredictability of operational risks is particularly prominent in our country, so a more realistic approach The focus of preventing operational risks is to focus on the following four aspects: Strengthen process management 1. Check and sort out existing processes to eliminate possible loopholes. At present, although all commercial banks in my country have regulatory departments and risk management departments, they do not have specific operational risk management departments, let alone operational risk management departments for personal housing credit. There are many loopholes in the loan contract and loan process. If not corrected early, it will seriously affect the development of the business. 2. Conduct careful analysis and market research on newly developed products to avoid blind investment, ineffective investment and high-risk investment. At present, the product updates of personal housing credit business are gradually accelerating. In order to seize market share, various banks have made a lot of innovations in many aspects such as repayment methods, guarantee methods, methods, etc. But have these innovations gone through sufficient market research and strict operational risk review? , questionable. It is understood that before launching a new personal housing credit product, my country's commercial banks rarely conduct accurate data analysis and predictions, and rely on experience and leadership's subjective judgment. This is not only because the database has not yet been established, but also because my country's commercial banks Not paying enough attention to market research. The establishment and improvement of emergency measures. The loopholes and risks detected should be avoided and corrected through reasonable means, and excessive haste and overbearing clauses should be avoided as much as possible. At present, our country's commercial banks have not done enough in this regard, especially in dealing with early repayment. After understanding the possible losses caused by early repayment, the banks adopted measures to immediately increase liquidated damages and limit early repayment. Because there was no corresponding provision in the loan contract, it caused a strong response from the society.

2. Standardize and strictly formulate business manuals. For personal housing credit operators, there should be detailed management manuals. At present, some commercial banks have similar management laws, operating specifications and implementation rules, but they are far from enough. A comprehensive business manual is a necessary condition for grassroots personnel to carry out standardized operations. In many cases, operational risks arise from operators' unfamiliarity with the business. Such an operation manual must be as detailed as possible, with reasonable explanations and handling of every specific situation that may occur. The formulation of the manual should pay special attention to the design and handling of operational risk-prone links. 3. Establishment, management and maintenance of database At present, some commercial banks have attached great importance to the establishment, management and maintenance of database, and have begun to establish their own personal housing credit database. It should be pointed out that my country's commercial banks have not yet realized the good role a good database can play in promoting business development and the guiding role it can play in operational risk prevention. The database of personal housing credit is not just a database of personal information, it should also include data information on early repayment, default risk, operational risk and other aspects. Without this comprehensive data information, it is impossible to comprehensively analyze and understand the risks faced by individuals and housing credit through mathematical models, and it is impossible to formulate ultimately effective policies. A good operational risk prevention method for fake mortgages that is currently very harmful is to establish a database to prevent fake mortgages, collect a large number of cases for statistical analysis, and extract highly relevant factors to facilitate the prevention of fake mortgages in specific operations. . Unfortunately, although my country's commercial banks have encountered a large number of fake mortgages, a similar database has never been established. Until now, the only way to prevent the risk of fake mortgages is through the static statements and reports of credit officers to developers. Empirical judgment of the project situation. 4. Strengthen personnel management and optimize risk management positions. The operators of personal housing credit business are obviously different from the credit personnel of corporate business. They are responsible for not only the investigation and approval of projects, but also the investigation, approval and procedures of individual borrowers. , or may only be responsible for one of the two. Therefore, the management of operating personnel is the most important and difficult part in preventing operational risks. Empirical data shows that once internal bank employees are involved, operational risks will bring huge economic losses. Without excellent talent allocation and scientific incentive mechanism, no matter how perfect the management framework is, it will not be able to operate. From the perspective of market development requirements, the development of commercial banks is a process of constantly seeking a balance between risks and opportunities. Therefore, a "risk manager system" should be established within the risk management system. Its functions should be determined to be efficiency-centered, with risk control and prevention as its responsibility, and to control risks at a lower level during credit review, inspection and bad credit management. . 2. Guarantee risk 1) Guarantee risk Credit guarantee is only a necessary condition for granting credit but not a sufficient condition for granting credit. At present, commercial banks still have a wrong understanding of credit guarantees, that is, they attach too much importance to the role of credit guarantees and believe that as long as there is a credit guarantee, they can extend credit. Credit guarantee only disperses credit risks and provides a compensation function, but it cannot change the borrower's credit status, nor can it guarantee full repayment of credit, so it cannot fundamentally eliminate credit risks. There is a lack of standards for judging the qualifications of collateral assessment agencies and identifying the accuracy of assessment conclusions. There are no clear requirements for whether the bank or the borrower should hire the appraisal agency, what qualifications the appraisal agency has, how to assess the credit status of the appraisal agency, and how to determine whether the appraisal conclusion of the appraisal agency is accurate. The actual situation is that the appraisal agency is basically hired by the borrower to pay the appraisal fee. The hired appraisal agency often considers the borrower's requirements and overestimates the value of the collateral. The bank will approve it as soon as it sees the appraisal report of the appraisal agency, resulting in most cases. The value of the collateral is overvalued. When the bank disposes of the collateral, either the collateral is valuable and unmarketable, or the liquidation value is significantly lower than the book value. In addition, there is no standard for judging the liquidity of collateral. As a result, it is impossible to judge in actual work whether the collateral is accepted by the market and to what extent. 2) Guarantee risk management countermeasures and suggestions 1) Banks must improve the guarantor guarantee system, strengthen the risk review of guarantors, and conduct in-depth analysis of their solvency: First, starting from a single guarantor, assess the guarantor’s guarantee ability and its financial status. Whether it can afford the amount of external guarantees, and whether the total amount of external guarantees and its tangible net assets are within a reasonable proportion; second, from the perspective of risk control, treat mutual guarantee guarantors as a group of borrowers, and review their credit concentration, Prevent excessive concentration of risks due to insufficient guarantees; third, set the guarantee limit for credit-granting enterprises and strictly limit the credit access of enterprises that exceed the limit. Strengthen the analysis of the guarantor’s financial strength. When analyzing the guarantor's financial strength, we must first analyze and master information about the guarantor's financial status, cash flow, credit rating and contingent liabilities. Secondly, it is necessary to judge whether the guarantor has the ability to perform its obligations through the analysis of this information. The key points of the analysis are: first, the guarantor's contingent liabilities, especially the quantity and amount currently provided by the guarantor; second, the total amount of guarantee provided to the outside world and Whether the guarantor’s tangible net assets are within a reasonable proportion. 2) Strengthen the analysis of collateral and pledges. Collaterals and pledges must be evaluated in accordance with the principles of MarktoMarket.

For collateral, the realizability and future liquidation value of the collateral must be considered; for stocks, shares and charging rights, the impact of company conditions and market changes must be considered, as well as the future price changes of stocks, schools, highways, etc. Uncertainty about road toll rights to effectively protect bank claims. 3) The bank should investigate the qualifications and reputation of the appraisal agency and appraisers, including: whether there is a financial or other interest relationship between the appraisal agency and the borrower; the relationship between the appraisal agency and the borrower or with bank insiders; the use of the appraisal agency Whether the evaluation method is suitable for the evaluation project, whether the previous evaluation conclusions of the evaluation agency are consistent with the actual situation, etc. 4) Regulate credit guarantee institutions. First, guarantee companies must be managed as credit customers, and their guarantee lines must be determined through unified credit granting. At the same time, when granting credit, explore and establish a credit evaluation and credit granting system that is consistent with the actual operation and management of guarantee companies. The second is to carefully examine whether the guarantee limit disclosed by the guarantee company is comprehensive, whether the guarantee limit exceeds a certain multiple of the guarantee company's registered capital, and whether the risk compensation mechanism is sound. The third is to pay attention to preventing risks arising from borrowers and guarantee companies jointly defrauding banks, and to examine whether the counter-guarantee measures set by guarantee institutions are complete. For the evaluation report of the guaranteed enterprise issued by the guarantee agency, the bank also needs to send people to investigate the borrowing enterprise. 3. Moral hazard 1) The concept of moral hazard. Moral hazard means that after the principal and the agent sign a contract, due to information asymmetry during the performance process, the party with the information advantage may take actions that are detrimental to others in order to maximize its own interests. Actions that usurp the interests of others, thereby causing the possibility of losses to others. In the operation and management process of commercial banks, there are multi-level and multi-faceted principal-agent relationships. Therefore, moral hazard caused by information asymmetry inevitably arises and objectively exists in the operation process of commercial banks. The main source of profit for my country's commercial banks is still credit business, and the issue of moral hazard in credit business has also become the focus of research on risk prevention in commercial banks in recent years. 2) The levels and manifestations of moral hazard in the credit process of my country’s state-owned commercial banks. According to the management system and operating procedures of commercial banks’ credit business, moral hazard mainly exists at the following three levels, and is specifically manifested as: the decision-making level of commercial banks’ credit business Moral hazard: At present, the decision-making level of commercial bank credit is mainly the leaders and credit approval personnel of banks at all levels. Under the current property rights system of my country's commercial banks, most individuals who make credit decisions do not have property rights commensurate with their powers. In fact, they do not have sufficient economic ability to be responsible for the decision-making results, or they only have negligible responsibilities. Moreover, in the current situation Under the internal management mechanism of my country's commercial banks, the responsibilities and rights of decision-makers for the risks and benefits created by credit are also unequal. This is the fundamental reason for the existence of moral hazard at the decision-making level, which is specifically reflected in the non-marketization of decision-making behavior and the impact on Senior management's restraint is softened, their response to violations is slow, and so on. Moral hazard in the management of commercial banks: The management of commercial banks mainly refers to the credit business managers of management banks at all levels. The moral hazard at the decision-making level increases the moral hazard at the management level. For example, when opinions are expressed not based on reality but to "cater to one's will", the interest goals are short-term, and when the decision-making level's binding force on the management is softened, different forms of Operating outside of authority, reacting indifferently or even acquiescing to violations by subordinates, operating off the books, manipulating accounting statements, artificially adjusting statistical data, reporting good news but not bad news, etc. Moral hazard at the management level of commercial banks: The management level of commercial banks refers to the direct managers of credit business. They are the collectors of information and are the level with the richest amount of micro information. Because they obtain the largest amount of micro information, when management supervision is not in place, they become the level with the highest frequency of moral hazard occurrences within commercial banks. For example, staff take advantage of system loopholes, highly qualified personnel use computers to commit crimes, credit and non-performing asset managers delete unfavorable information or provide false information to mislead management, etc. 3) Preventive Countermeasures for Moral Hazard Behaviors in the Credit Business of my country's Commercial Banks Since the causes of moral hazard problems in the credit business of my country's commercial banks are complex and there are many influencing factors, therefore, to effectively prevent moral hazard, it is necessary to have internal and external, institutional and human resources. and comprehensively prevent moral hazard at all levels. First, establish a modern enterprise system with clear property rights, clear rights and responsibilities, separation of government and enterprises, and scientific management. It should be said that domestic commercial banks have made great progress in establishing a modern enterprise system and improving the corporate governance structure. However, as the main body of my country's commercial banks, state-owned commercial banks still have not completely got rid of the situation of inseparability between government and enterprises. The shareholders of small and medium-sized joint-stock commercial banks The role is still limited. Problems such as unclear property rights and insider control are difficult to effectively solve. Shareholders' meetings and the internal supervision system of commercial banks are still unable to effectively restrict decision-making and senior management. It is necessary to truly establish a management system in which the decision-makers of commercial banks are responsible for the bank's operating results with their own rights and interests, and the operators directly bear the economic responsibility for operating failures. Only then can the moral hazard control in the credit business of commercial banks achieve satisfactory results. . Secondly, further improve the internal control system of commercial banks and transform the risk management method of decentralized management of my country's commercial banking departments into process management and system management. According to the daily operation and management behavior of commercial banks, risk control is divided into risk control of business processes and risk control of management processes to conduct separate research and design.

It is necessary to strengthen planning, organization, coordination and control within each department under the established organizational structure, and effectively control risks in various management tasks and work processes, so as to give full play to the role of the internal control system in preventing moral risks. Third, establishing an adequate information disclosure system and strengthening external supervision can effectively reduce the internal moral risks of commercial banks. Give full play to the role of the China Banking Regulatory Commission and the Banking Association, such as establishing an information database for financial practitioners, fully disclosing information on personnel who are not suitable for senior management positions in commercial banks, and improving the ability of commercial banks to obtain human resources information; requiring all commercial banks to improve their response to violations Transparency in penalties for responsible business personnel, etc. At the same time, it is also necessary to clarify the responsibilities of regulatory authorities and establish an accountability system to ensure timely and effective external supervision. This prompts commercial banks to not only conduct qualification reviews by banking regulatory authorities when appointing senior managers, but also consciously strengthen the prudence of personnel appointments from the perspective of their own risk control, and reduce the moral hazard of management in the credit process of commercial banks. Fourth, use legal constraints to increase the punishment for credit officers who engage in moral hazard behaviors. The establishment of a strictly enforced legal system plays an important role in preventing moral hazard among bank loan officers. For example, according to Article 9 of Hong Kong's Prevention of Bribery Ordinance (Chapter 201 of the Laws of Hong Kong), bank credit business officers accept clients for themselves or their relatives. Any valuable thing such as money, gifts, positions, services, preferential treatment and other benefits, thereby giving preferential treatment in handling credit business, is illegal. The maximum penalty is 7 years in prison and a fine of HK$500,000. At the same time, it will incur A ban of up to 7 years from holding a managerial position in any corporation or public institution or from practicing in any profession. Through severe punishment, it plays a huge deterrent role in maintaining financial order, curbs the greed of credit business personnel, prevents credit business personnel from breaking the law, and prevents moral hazard behaviors in credit business. Fifth, create a corporate culture of integrity and establish a team of honest and efficient credit personnel. Corporate culture is the core model and belief that determines the operation of a company. A sound moral culture is the basis for decision-making by employees at all levels in handling daily affairs. If credit business personnel at all levels can voluntarily maintain high ethical standards, banks will not need to worry about illegal activities. Strengthen the integrity management of credit personnel by establishing a corporate culture of integrity. It is necessary to constantly pay attention to the behavior of credit officers at all levels and detect problems early; it is necessary to contact customers through different people to prevent them from corroding credit officers; it is necessary to report various frauds through internal complaint mechanisms; it is necessary to target the specific situations of employees , Arrange careful training plans, such as frequent case analysis and case-based preventive education, to make credit practitioners aware of risks, deepen their understanding of laws, regulatory regulations, and ethical standards, and improve their alertness to moral dilemmas. and skills in dealing with related issues.