Credit risk refers to the possibility that banks will suffer losses due to the uncertainty in credit activities, specifically, it refers to all risks caused by customers' default.
For example, in asset business, the quality of assets deteriorates due to the borrower's inability to repay debts; Debt business depositors withdraw a lot of cash to form a run, and so on.
2. Causes:
Credit risk refers to the possibility that the borrower cannot repay the debt or bank loan in full and on time due to various reasons and breach of contract.
In the event of default, creditors or banks will bear financial losses because they can't get the expected income.
Credit risk is caused by two reasons.
(1) periodicity of economic operation:
In the period of economic expansion, credit risk is reduced, because strong profitability reduces the overall default rate. In the period of economic contraction, credit risk increases, because the overall profit situation deteriorates, and the possibility that borrowers cannot repay in full and on time for various reasons increases.
(2) Special events that have an impact on the company's operation occur:
The occurrence of this special event has nothing to do with the economic cycle and has an important impact on the company's operation. For example, when people knew the fact that asbestos had an impact on human health, product liability litigation led to the bankruptcy of a well-known company that was in a leading position in the asbestos industry and could not repay its debts.
Extended data:
1, credit risk has four main characteristics:
(1) Asymmetry: expected income and expected loss are asymmetric. When an entity bears a certain credit risk, the expected income and expected loss of the entity are asymmetric.
(2) Cumulative: Cumulative credit risk refers to the characteristics of continuous accumulation, vicious circle, chain reaction, sudden outbreak beyond a certain critical point and financial crisis.
(3) Non-systematic: Compared with market risk, the observable data of credit risk are few and difficult to obtain, so it has obvious characteristics of non-systematic risk.
(4) Endogenous: Credit risk is not entirely driven by objective factors, but subjective and cannot be confirmed by objective data and facts.
2, the characteristics of credit risk:
(1) potential risks. Many companies that evade bank debts know that they are unable to repay them. For example, when many state-owned enterprises decide to lend to banks, they have no intention to repay them at all. According to the survey, the average asset-liability ratio of state-owned enterprises is as high as 80%, of which more than 70% is bank loans. This high debt has caused the inefficiency of enterprises, and the potential risks are increasing day by day.
(2) The long-term nature of risks. The change of ideas is a long-term and subtle process, especially at present, the process of China's transition from planned economy to market economy will be a long-term pain. It will take several generations to cultivate the contract rules between banks and enterprises and establish an effective credit system.
(3) The destructiveness of risks. When the ideological and moral standards deteriorate, things will get worse and worse. After the formation of non-performing assets, if the enterprise is in a cooperative attitude, the losses of both parties will be minimized; However, in this case, many enterprises often choose to ignore and conceal, which makes the bank spend a lot of manpower, material resources and financial resources unable to make up for the losses.
(4) the difficulty of control. At present, the measures to deal with non-performing assets of banks are lagging behind, which is related to the definition of non-performing assets of banks and the incomplete unification of bank credit risk prediction mechanism, transfer mechanism and control mechanism. After the appearance of non-performing assets, it is often useless to take various remedial measures.
Baidu Encyclopedia-Credit Risk
Baidu Encyclopedia-Commercial Bank Risks