Study on Risks and Benefits Caused by Commercial Bank Loan Pricing for Small and Medium-sized Enterprises

DOI

10.2991/icecsd-17.2017.3How to use a DOI?

Keywords

Commercial bank; SMEs; defalut risk; expected revenue; loan interest rate; collaterals

Abstract

The expected payment of making loan to SMEs for commercial bank is jointly determined by interest rate and the probability of enterprise's repayment. This paper firstly analyzes the effect of loan interest rate on enterprise's risks on the basis of constructing game model of the loan relationship between the bank and enterprise. And then the expected revenue function of commercial bank for making loan to SMEs is built and analyzed. According to the research results, the default risk of SMEs will go up in pace with the improvement of loan interest rate on the premise of the lack of effective collaterals. In addition, the effects of change in loan interest rate on the expected payment of commecial bank can be divided into two parts: income effect and risk effect, and there exits an optimal loan interest rate for commercial bank to realize the revenue maximization under a certain condition. Finally, the paper puts forward some suggestions on effectively controlling credit risks of SMEs and maximizing returns, including innovating on mortgage system and improving the system of loan pricing.

Copyright

© 2017, the Authors. Published by Atlantis Press.

Open Access

This is an open access article distributed under the CC BY-NC license (http://creativecommons.org/licenses/by-nc/4.0/).

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TY  - CONF
AU  - Lulu Hao
AU  - Jing Gao
PY  - 2017/01
DA  - 2017/01
TI  - Study on Risks and Benefits Caused by Commercial Bank Loan Pricing for Small and Medium-sized Enterprises
BT  - Proceedings of the 2017 International Conference on Education, Culture and Social Development (ICECSD 2017)
PB  - Atlantis Press
SP  - 12
EP  - 20
SN  - 2352-5398
UR  - https://doi.org/10.2991/icecsd-17.2017.3
DO  - 10.2991/icecsd-17.2017.3
ID  - Hao2017/01
ER  -