A Case Study of Bank Credit Assessments on the Small and Medium Enterprises

• Main Authors: LING-FEI LIN, 林玲妃
• Other Authors: Day-Yang Liu
• Format: Others
• Language: zh-TW
• Published: 2017
• Online Access: http://ndltd.ncl.edu.tw/handle/63gv76

碩士 === 國立臺灣科技大學 === 財務金融研究所 === 105 === The lending business plays an important role in a bank’s operations and contributes significantly to a Bank’s profitability. The quality of credit control has a great influence on the integrity of a Bank. While endeavoring to safeguard the rights and interests of its customers and shareholders, and ensuring stable growth in profitability, banks also play a part in supporting government policies for economic development. Small and medium enterprises (SME) make up 97% of the businesses in Taiwan and are the backbone of the country’s economic development. While lending to SME’s, banks are sometimes unable to fully understand the actual financial status and management performance of the Company from its financial statements because of information asymmetry. SME’s are therefore considered to carry relatively high risk. However, facing an overly-competitive market and squeezed interest spread, banks need to diligently strive for SME lending customers. For banks, therefore, the quality of credit assessment on SME’s is extremely important. They need to simultaneously taken into account the risk control measures, the improvement of asset quality, as well as the profitability of the bank. The research is conducted based on the credit policies of banks, supported by relevant literature review, banking practices and in-depth interview with the designated credit managers of the bank under study. The purpose is to identify the determining factors in the bank’s credit assessment process on SME’s. After inductive analysis, the following conclusions have been reached: The bank under study adopts a front/back office system to evaluate the credit risks at different stages of lending, aiming to achieve segregation of duties. A credit rating mechanism is used for the evaluation, which is supported by expert assessment. Through III a macro perspective, the Bank adjusts its credit framework based on the individual status of the credit accounts, taking into account the economic status, industrial cycles, as well as market demand and supply. To counter the effect of information asymmetry and avoid adverse choice, onsite inspections and plant visits have been conducted to further grasp the operational performance and credit standing of the customer, which have not been disclosed in the documents. Analysis was also made on the JCIC credit information of the customer and its responsible person. An integrated credit assessment was then made based on five main aspects, including the credit customer, purpose of lending, repayment source, securities provided and the perspective of the credit. It is hoped that this research will help the banking personnel understand the importance of onsite inspection when making credit assessment on SME’s, in the meantime grasp the key observation points during the inspection to achieve the purpose of “Know Your Customers”. Adequate understanding and classification of customers will improve the credit decision-making process and elevate credit quality. The research results, on the other hand, may be referred to by SME’s when filing credit applications. It is expected that it will contribute to a win-win situation between banks and the SME’s.