An analysis of credit risk for commercial banks in China

Abstract

Credit risk is the greatest and essential risk of a commercial bank, but also it is one of the core elements that the commercial bank should control in its operations. The research on the credit risk management of commercial bank can help guarantee security, control the credit risk effectively with a minimum loss and take preventive measures. From December 11, 2006, China’s financial industry transformed into the full-open period, China began to open foreign bank RMB business on Chinese citizens, remove the restrictions on areas and other non-prudential restrictions, and to keep promises that we made to give national treatment to foreign banks when China entered into the World Trade Organization. This also means that China’s commercial bank and foreign bank will compete on the same playing field. But it’s necessary to recognize that great gap between China’s commercial banks and foreign banks on capital size, management technology, product innovation and risk management, particularly, the commercial bank’s credit risk management. This study is based on this background and explores this theme of commercial bank’s credit risk management.