What are the risks in commercial bank mortgages and how to prevent them

From the point of view of the development of China's commercial banks, the risks faced by China's commercial banks are concentrated in credit risk, market risk, operational risk and liquidity risk .

1, credit risk

Credit risk, also known as default risk, refers to the possibility of loss to the creditor due to the counterparty (the debtor) is difficult to fulfill the repayment of the debt or unwilling to fulfill the debt. Bank credit risk mainly refers to the risk of bank loan loss caused by the debtor's inability to repay the borrowing in full and on time. Credit business is the traditional and main business of banks. Banks are the credit center of the society and the concentration of credit risk. Therefore, in the modern credit economic conditions, banks face credit risk is a more prominent risk, and credit risk to the bank's loss is also huge.

2. Market Risk

Market risk refers to the risk of loss in the bank's on-balance-sheet and off-balance-sheet operations due to unfavorable changes in market prices (interest rates, exchange rates, stock prices and commodity prices). Market risk exists in both trading and non-trading of banks. The Basel Committee defines market risk as the risk of loss on on and off-balance sheet positions due to changes in market prices.

3. Operational Risk

Operational risk can be categorized into four types according to the type of risk, which are internal operational processes, human factors, institutional factors and external events. By risk factors can be divided into seven types, including: internal fraud; external fraud; employee activities and workplace security issues; customer, product and business activity security issues; damage to the bank's physical assets to sustain operations; business interruption and system errors; administrative, delivery and process management.

4, liquidity risk

Liquidity risk is one of the main risks faced by commercial banks in China. With the opening of the financial market is increasing, liquidity risk once increased into a liquidity crisis, it will cause irreversible losses. Liquidity risk, compared with credit risk, market risk and operational risk, the formation of a more complex and extensive reasons, is usually regarded as a comprehensive risk.

Based on the analysis of loan collateral risk, risk prevention can be carried out in the following aspects.?

①Strict examination. Strict examination of collateral, property rights relationship, mortgage contract and related documents is the fundamental measure to prevent loan mortgage risk.

For the collateral itself, credit officers should review the authenticity of the collateral right certificate and verify the authenticity of the collateral corresponding to the right certificate (e.g., house, land use right, etc.) through field inspection; secondly, credit officers should also review the collateral in strict accordance with relevant laws and regulations, to see whether the collateral is permitted by relevant laws and regulations and belongs to the scope of collateral permitted by the bank.

For the property right relationship of the collateral, if it is **** have property (such as houses) must have the rest of the **** people agree to mortgage the authorization, if it is the property of the partnership must have the rest of the partners agree to mortgage the authorization. If the collateral for state-owned enterprises and collective enterprises, must have the competent State-owned Assets Supervision and Administration Commission and the Employee Council agreed to mortgage the authorization documents; if the collateral for a limited liability company or a joint stock limited company, must be in accordance with the articles of association with the general meeting of shareholders or the board of directors agreed to mortgage the authorization documents.

For all kinds of documents of the collateral, the credit staff must strictly examine and require all relevant documents. This requirement must depend on the specific collateral, such as imported car mortgage, you need to operate the license plate, product certification, purchase and sales contracts, customs declarations and invoices and many other formalities.

For the mortgage contract, credit officers must strictly review the relevant conditions of the loan contract, especially its additional effective terms and the business scope of the borrower's business license. In addition, it is especially important to note that the effective period of the mortgage contract must cover the effective period of the loan contract.

②Do a good job of registration and filing. According to the Guarantee Law, real estate, forests, aircraft, ships, vehicles and business equipment and other movable assets for mortgage need to be registered according to law, the mortgage contract from the date of registration to take effect. Therefore, when handling mortgages, banks must pay special attention to whether the collateral needs to be registered in order to take effect. In addition, it is also necessary to confirm whether the loan contract and the security contract need to be notarized according to the relevant laws and regulations.

③Good value assessment. Collateral value assessment is the most common means of preventing mortgage risks. To this end, the bank must first establish a complete set of collateral value assessment of the internal management system, regular assessment of the value of the collateral, the conditions, the need for the establishment of the unit must also be a day-by-day market surveillance system, and efforts to carry out this aspect of the training of personnel. Secondly, it is also necessary to strengthen the contact, understanding and assessment of asset appraisal companies, so as to prevent the risk of fraud in the outsourcing of collateral value appraisal. Once again, the government departments that issue title certificates for mortgages should not be completely ignored, and in particular, attention should be paid to analyzing whether there is a possibility that the borrower buys out key personnel of the government departments to issue false title certificates or duplicate mortgages.

④Do a good job of asset preservation. Asset preservation of bank loans involves the disposal of collateral. In the event of default by the borrower, the bank should seize the collateral in time to protect its rights as the first beneficiary. When disposing of the collateral, efforts should be made to coordinate with the relevant interested parties, giving full consideration to the disposal costs, taxes, interest losses after loan defaults, etc., and preventing the risk of the collateral being sold cheaply.

EXTENDED INFORMATION

Operational risk management in a bank involves not only procedures and processes within the bank, but also the bank's organizational structure, policies, and processes for managing operational risk. For an organization to deal with operational risk there should be proper policies against operational risk, firstly these policies should be defined and also communicated to the entire bank personnel. There are several aspects to consider in this process: firstly, there should be a clear governance structure, and it is important to understand who to report to in what circumstances.

In the case of a typical bank, there should be a separate credit risk management organization, and there are different business units responsible for the day-to-day management of the business, i.e., there are two reporting mechanisms, for the day-to-day operations, to the manager of the business unit, and for the credit, to the relevant credit manager. Another very important point in the information involved in a bank is the people who get the information and the detail of the information at different levels. For example, the board of directors needs information in a generalized form and therefore it is not possible to give the same information to all people. In addition, the information should be flexible, and there also needs to be a flexible method of gathering the information.

Baidu Encyclopedia - Loan Mortgage Risk