On a basis of the development of credit risk models, this study aims to help managers of financial institutions understand the development of the models so as to develop their own model that will provide objective and reasonable references for banks to decide the lending rate. Furthermore, this study used "Utilization of Long-Term Funding" as the object and studied individual cases of approved loans. By using risk neutral evaluation method to study the difference between the lending rate of loans and the risk-free interest rate of public bonds, to extract implied probabilities of default and required credit risk premiums form actual market data on interest rates. These credit risk premiums of model were used to be compared with the actual markups of banks and the results are as follows:
1.Most values stated in credit risk premium are lower than the actual markups for banks usually consider the burden of other capital costs and the factor of liquidity premium when they set the rating for markup.
2.After a loan is approved, the assumed recovery rate upon application will adjust according to the market value of the collateral. When the recovery rate decreases, the expected loss rate on the loan will gradually increase. Moreover, the higher the assumed recovery rate, the larger the corrected expected loss rate after the loan is approved.
3.In recent years, the non-performing rate for banks in Taiwan has reached a record high. Even though banks face less credit risks when they make long-term loans in "Utilization of Long-Term Funding", the probability of default has increased in recent years, which has contributed to the increase of expected loss rate on the long-term loan. In sum, banks still face credits risks that should not be ignored when they manage long-term loans. Thus, it is necessary to improve loan review to enhance the quality of loans and to increase the efficiency of utilization of long-term fund.
| Identifer | oai:union.ndltd.org:NSYSU/oai:NSYSU:etd-0620101-114055 |
| Date | 20 June 2001 |
| Creators | Lin, Chia-Jung |
| Contributors | Yue-Shan Chang, Ming-Chi Chen, Chau-Jung Kuo |
| Publisher | NSYSU |
| Source Sets | NSYSU Electronic Thesis and Dissertation Archive |
| Language | Cholon |
| Detected Language | English |
| Type | text |
| Format | application/pdf |
| Source | http://etd.lib.nsysu.edu.tw/ETD-db/ETD-search/view_etd?URN=etd-0620101-114055 |
| Rights | off_campus_withheld, Copyright information available at source archive |
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