Consumer Credit Risk and Prevention.doc

Consumer Credit Risk and PreventionAbstract In China, consumer credit is an emerging way of credit, with the operation of the mechanism continues to mature, will occupy in the national economy an increasingly important position, for expanding domestic demand, stimulating economic growth plays an important role. However, due to the characteristics of consumer credit itself, as well as our special credit market environment, consumer spending habits, consumer credit business, there are a number of risks and uncertainties. In this paper, consumer credit, the risks were analyzed, combined with Chinas actual situation and proposed a series of credit risk prevention advice and recommendations.Keywords: Consumer credit; risk; preventionCLC number: F063.2 Document: AI. Definition and Literature Review(A) The definition of basic concepts. Consumer credit is a commercial enterprise, bank or other financial institutions to provide credit to the individual consumers, mainly for consumers to buy durable goods (such as furniture, household appliances, automobiles, etc.), housing and various services. Is divided into two basic types: closed-end credit and open-ended credit. Closed-end credit means the consumer within a period of time in the same fractional amount of debt way. Common secured loans, auto loans and installment loans (installment sales contracts, installment credit and a one-time cash payment of credit) and others. Open-end credit refers to loans issued by credit institutions cycle, consumers partial payment based on a regular basis to pay bills by mail.Consumer Credit risk refers primarily to the consumer credit business generated a variety of risks and uncertainties, with objectivity, accidental damage, uncertainty, relativity and other features. Main features of Chinas consumer credit risk are:1, uncertainties more;2, compared to other credit risk is high;3, individual consumer credit, cash collateral is difficult and expensive.(B) the literature review. In recent years, scholars at home and abroad in the Consumer Credit Risk and Prevention launched a series of meaningful discussion. Yuan Liang (2008) theory of consumer credit risk analysis that produce consumer credit risk is mainly due to asymmetric information; Yangting Fang (2009) from a commercial point of view of practical banking operation explains Chinas current consumer credit risky reasons, namely personal credit information system is not perfect, shortcomings in bank management. Duan Zhao-qing (2009) argued that the absence of legal protection for consumer credit risk is the main reason for growing. With regard to consumer credit risk prevention, ZHOU Lei (2009) proposed to establish a personal credit against the system to regulate consumer behavior, improve the level of bank credit management; Yu Xiang (2007) argued that consumer credit risk prevention should speed up the system of individual credit system building as well as ways to enhance consumer confidence and desire to start credit.Second, Chinas Consumer Credit Risk AnalysisIn recent years, consumer credit business in China has developed very rapidly, the relevant operating mechanism has gradually matured, however, compared with the world average, Chinas consumer credit business risk remained at a high level, for two main reasons:(A) personal consumer credit legislation lags behind. China has not yet a unified and standardized consumer credit, consumer credit activities and adjust the relations between the national laws. The criteria adopted by the commercial banks targeted is not strong, for dishonesty, breach of contract is not a specific method of punishment.(B) the countrys consumption policies lags behind. China provides housing, automobile consumption policy environment seriously lagging behind. Individual applicants for such loans must be assessed to the departments concerned and mortgage registration, to the public notaries handle notarization formalities, and the need to pay all certification fees, assessment fees, etc., is bound to damage consumer enthusiasm.(C) the commercial banks own management system is weak. The one hand, commercial banks lack in-house consumer credit management experience, and a considerable portion of information was not on the machine management, and difficult to achieve resource sharing, to the status of the borrowers assets and liabilities, etc. to understand the lack of normal procedures and channels; the other hand, some commercial banks in order to expand consumer credit scale, arbitrarily reduce lending standards and guarantee conditions are not conducive to the healthy development of consumer credit business.(D) consumer credit risk management inadequate. At present the lack of commercial bank lending survey before, there is no effective means of supervision and inspection.(5) Chinas consumer spending habits. Present, Chinas consumer spending habits are still conservative, and only a limited number of large consumer goods take the form of consumer credit, the residents in order to save the main structure of financial assets, consumer credit has not really popular.Third, consumer credit risk prevention measures(A) the establishment of consumer credit legal environment. Strengthen the consumer credit legislation, the development of consumer credit, to provide legal support for urgent problems at present is to develop the Consumer Credit Act, and the main body of consumer credit, objects, procedures, methods as well as the rights and obligations of both lenders and borrowers to make a clear regulations, regulating consumer credit market behavior of the parties.(B) to accelerate the pace of building personal credit system to system. A sound system of individual credit system is the key to banks in developing consumer credit, only the establishment of the national network of individual credit files, in order to allow banks to fully understand a persons willingness and ability to repay debt repayment, which is the solid premise of bank loans and the strengthening of the construction of social credit key.(C) strengthening of consumer credit guarantees and insurance work. Bank guarantees and insurance against credit risk, the establishment of risk prevention mechanism, an important tool. Guard against credit risk of banks and the security of the entire financial system is essential.(D) enhance public confidence and aspirations of consumer credit. Enhance public confidence and aspirations of consumer credit is a systematic project, needs to be done. First, we must make every effort to promote economic development and improving peoples income levels, adjusting income distribution, income redistribution do the work. Secondly, we should actively develop new varieties of consumer credit, expand consumer credit market, banks should also step up publicity and demonstrate its benefits to the people and enhance peoples consumer credit and consumer credit products, understanding and acceptance.(5) to encourage more financial institutions to participate in the development of consumer credit. Chinas current financial institutions to provide consumer credit is extremely limited, consumer credit was largely dominated by four state-owned commercial banks, should encourage more financial institutions to carry out consumer credit business, giving consumers a wider choice of room.(Vi) to prevent commercial banks to accelerate the establishment of consumer credit risk management system. Specifically from the following aspects: (1) the gradual creation of society as a whole range of personal credit environment; (2) seriously explore the individual customers differentiated services approach, adjusting the customer structure; (3) a sound and perfect the banks internal credit management mechanism.(Author: