The Necessity of Credit Risk Management (I) Information Asymmetry
Information economics believes that in any transaction in economic operation, if the information related to the transaction owned by both parties is asymmetric, it will cause? Adverse selection? And then what? Moral hazard? . Judging from the time when information asymmetry occurs, information asymmetry may occur before the parties sign the contract, which is called ex ante asymmetry, or it may occur after the contract is signed, which is called ex post asymmetry. Will information asymmetry trigger in advance? Adverse selection? ; Will information asymmetry lead to hindsight? Moral hazard? . Adverse selection and moral hazard in credit activities are important factors leading to the formation of credit risk.
Information economics calls the party with information advantage (insider) the agent, and the party without information advantage (uninformed) the client. In the credit activities of commercial banks, borrowers have a better understanding of their own situation and the risks of loan projects, while commercial banks may lack understanding of borrowers' situation, credit purposes and risks. What may be caused by this kind of information inequality between commercial banks and borrowers before signing credit contracts? Adverse selection? . Because in this realistic situation, commercial banks must raise interest rates in order to obtain higher returns. Because it is impossible to know the risk degree of all projects, banks can only determine the loan interest rate according to the average risk degree of each project in the market. In this way, low-risk projects quit the lending market because the borrowing cost is higher than expected, while those who are willing to pay high interest rates are all high-risk projects. Adverse selection? As a result, the average risk of loans has increased. Even if commercial banks take the risk prevention measures of mortgage loans, adverse selection will still exist. This is because the collateral that has reached a mortgage agreement is likely to be low-quality assets or assets with a net asset value lower than the mortgage amount. In this way, when the bank loan can not be recovered normally, the collateral can not make up for the loss of funds, and the bank's non-performing assets are formed.
After the signing of the credit contract, in the process of loan execution, because commercial banks have less information about the actual use of loan funds, risks and benefits of investment projects than borrowers, and because of the high cost of post-event supervision such as cost control and the quality and experience of credit personnel, commercial banks cannot spend a lot of manpower and expenses to track the borrower's loan use information at any time, so loan enterprises may have opportunistic motives, conceal the real information about the use of funds and adopt an incomplete attitude.
In short, if the screening and supervision of borrowers by commercial banks are efficient and cost-free or low-cost, credit funds can be effectively allocated and asset quality can be guaranteed by narrowing the gap of information asymmetry. If the gap of information asymmetry is widening, it will lead to the mistakes of commercial banks in screening and supervising borrowers, thus deteriorating the quality of bank credit assets.
(B) the incompleteness of the credit contract
Credit contract is a typical incomplete contract. Because the credit contract can't be a complete contract, it leads to the possibility of credit risk.
The incompleteness of credit contract is related to people's bounded rationality. On the one hand, the factors affecting credit granting activities are complex, multifaceted and uncertain; There are both macro and micro; There are both internal and external enterprises; On the other hand, bank credit managers have limited ability to calculate and understand the influencing factors of credit activities, which will limit the collection, screening, analysis, processing and collation of information related to credit activities and the verification of information.
Due to the limited rationality and the complexity and uncertainty of the factors affecting credit activities, it is impossible for commercial banks to write all the information related to the contract into the terms of the contract before signing the credit contract, nor can they predict all kinds of accidents that may occur in the future, let alone determine the corresponding countermeasures for all kinds of accidents in the contract and calculate the utility results after signing the contract, and at the same time, it will increase the supervision and maintenance costs of the credit contract. The resulting incomplete credit contract means that credit risk may occur.
(3) the specificity of credit assets
The concept of asset specificity was first put forward by Williamson. Refers to the extent to which assets can be used for different purposes and by different users without sacrificing production value. Is it related to the concept of sunk cost? . It means that once some investments form specific assets (material assets or human assets, etc.). ), it is difficult to turn to other uses, even if it can be reconfigured, it will be at the expense of significant economic value loss. The concept corresponding to asset specificity is asset universality, which can be expressed as asset specificity approaching zero.
The specificity of assets in financial transactions generally refers to the liquidity of financial assets. Financial assets with high liquidity and strong convertible ability have poor specificity and strong versatility. However, financial assets with low liquidity and poor convertible ability have strong specificity and poor versatility. Cash and demand deposits are highly liquid financial assets, and the cost of their flow and transfer is very low. The liquidity of stocks and bonds is poor, and the cost of their conversion and realization is relatively high. The bank's credit market is an agreement market, not an open market transaction. Most loans have fixed-term arrangements, with obvious asset specificity and poor conversion ability. To ensure the safety of loans and prevent the occurrence of default, it is bound to consume a lot of information collection and analysis fees, as well as negotiation, signing, inspection in the process and post supervision fees. The specificity of credit assets can easily lead to opportunistic behavior and form credit risk.
(D) High-debt operation
The outstanding feature of commercial banks is high debt management. Even according to the Basel Accord, the capital adequacy ratio is only 8%, of which the core capital is only 4%. Therefore, most of the funds for the formation of commercial bank assets come from deposits. Compared with bank credit assets, deposits are highly extractable, highly liquid and short-term, which leads to the inconsistency and mismatch in liquidity and maturity of assets and liabilities of commercial banks. Once the quality of credit assets of commercial banks deteriorates, a large number of non-performing loans will be formed, which will aggravate the asymmetry and mismatch of assets and liabilities of commercial banks in liquidity and maturity, and may lead to bank runs or even bank failures. Therefore, the characteristics of high-debt operation of banks require banks to strengthen the risk management of credit assets.
The goal of credit risk management The goal of credit risk management is to promote the transformation of credit business management mode, from one-sided pursuit of profit management mode to realization. Risk adjusted income? Maximize the transformation of management mode; From the risk management model based on qualitative analysis to the management model combining qualitative and quantitative analysis; On the basis of paying attention to the risk of single credit business and decentralized management, strengthen the management of credit business portfolio. Through credit risk management, commercial banks can accurately identify and measure the risk cost and risk level of credit business, thus achieving the matching of risk and income and improving the competitiveness and profitability of banks.
The implementation process of credit risk management The credit risk management of commercial banks is a complete systematic project. On the one hand, it needs to be able to collect, monitor, measure and modulate various risks in time; On the other hand, this system should be able to provide perfect and comprehensive decision-making basis for various behaviors of banks, provide guidance for future risk control and error correction, and also provide means and tools for various monitoring.
(1) risk management implementation process
To build a risk management system, we must first ensure the applicability and practicability of this mechanism, and at the same time ensure the effectiveness and timeliness of this mechanism. Therefore, this system should follow the essential law of risk to formulate procedures.
1. Systematically study and analyze the risk system to ensure that banks establish risk management objectives and lay a suitable foundation for how to choose management modes.
2. Determine the risk classification and structure that banks should deal with, so that the established risk management mechanism has clear control and management objects.
3. Select accurate risk signals, determine the collection standards and time intervals of risk signals, and ensure timely and accurate understanding of risk conditions.
4. Choose the appropriate risk measurement method according to the bank's own reality.
5. According to the analysis of previous risk failure cases and risk events, determine the bank safety threshold at which the risk approaches or occurs as the basic standard of risk assessment.
6. The establishment of risk early warning system and intermediate control process should not only be guaranteed by manpower and organizational structure, but also be realized by technical means such as electronic information system as far as possible.
7. Establish the organizational structure of bank risk management, clarify the responsibilities of various risk management departments, and select professionals with risk measurement and control capabilities for banks.
8. Establish risk control instructions and behavioral norms for risk disposal, and establish corresponding risk early warning signal collection and measurement systems to ensure the continuity of bank risk management.
9. Ensure the effective operation of bank risk early warning regulation and transmission, control the application effect of various risk management tools and means, and ensure the smooth operation of risk consultation mechanism between banks and external management departments.
10. It is determined that when the risk enters the later transformation stage, the bank needs to draw up a series of management plans for risk disposal, transfer and exit to improve its ability to resist risks.
(2) the implementation process of risk management
The structure of credit risk determines that the intensity and mode of each risk base point of a loan are different. Affected by time-varying attributes, the structure of credit risk is in dynamic change. Therefore, the risk management of banks needs to be implemented according to this inherent essence and logical law, and all kinds of associations and processes of risks should be controlled in a complete early warning system as much as possible.