Risk Management of Commercial Bank Bill Business - 100 Questions

Author: Wang Lili
Publisher:
Publish Date: 2004-05-01
Features:
For many of us, bills are a complex emotion. They embody our hope for the development and growth of China's money market; they witness our continuous exploration of commercial banking operations; they record the steady and innovative nature of our role as workers in the Industrial and Commercial Bank of China (ICBC). Whether we have been involved in this meaningful and challenging work since the birth of China's bill market, gradually recognized and understood bills during its booming period, or started our banking career with bill business, we all love the profession we are engaged in. When the Chinese bill market reaches a critical stage of development and faces controversy, we sincerely feel a sense of responsibility: the bill market needs sufficient nourishment to maintain its healthy growth, and it needs solid foundations to thrive. We believe that bill business risk management is the nourishment and foundation of the bill market. Based on this simple understanding, we planned and compiled the book "100 Questions on Risk Management of Bill Business in Commercial Banks," hoping to share with all those concerned about the bill market the experience and insights we have accumulated in bill business, and to contribute our small part to the purification of the market environment and the harmonization of market order.
Bills are an inevitable product of the continuous move toward contractualization in economic development and an indispensable tool in the economic life under market economy conditions. Globally, bank acceptance drafts and commercial paper were the earliest developed instruments in the money market and the only two credit instruments available for trading during the initial long period of money market development. A money market centered on bills meets the needs of short-term investment and financing and achieves the transformation between corporate credit and bank credit. The development history of bill markets in developed Western countries shows that the bill market is the starting point and main body of the development of "the core mechanism of the financial system" in money market, with vigorous vitality and broad development space.
China's bill market began to take shape in the early 1980s and entered a stage of rapid growth at the beginning of the 21st century, with an average annual growth rate exceeding 50%, becoming a shining pearl in China's money market. The development and growth of the bill market have played a positive role in promoting the construction of China's market economy. On one hand, by promoting the transformation of commercial credit into bank credit, standardizing corporate short-term financing behavior, and cultivating and building China's social credit system; on the other hand, it helps optimize the capital structure of banks and enterprises, meets the needs of corporate short-term financing, expands the business space of commercial banks; at the same time, it accurately reflects the supply and demand conditions of the money market, expands the channels for the central bank to inject base money, improves the transmission mechanism of monetary policy, and increases the multiplier effect of macro-control policies.
However, as the bill market rapidly develops, risks follow one after another. Credit inflation and bubbles occasionally appear, irrational competitive behaviors persist despite prohibitions, and criminals collude internally to engage in bill fraud, causing risks and losses to banks. The lack of a risk management mechanism for the bill market has attracted widespread attention from all sectors of society. Throughout the entire process of bill issuance, acceptance, discounting, rediscounting, and collection, uncertainties exist, just like in other financial activities, leading to various operational risks and even systemic credit crises. Developing the bill market requires establishing corresponding risk prevention mechanisms, improving risk management methods, and establishing a timely and accurate business supervision network. This is the institutional arrangement that the bill market must build.
In the process of promoting the development of China's bill market, commercial banks play a pivotal role. As organizers of the market, commercial banks specifically organize market trading activities, provide trading venues and facilities, formulate self-regulatory trading rules, collect, organize, and release market information, and improve the efficiency of market transactions. As providers of market trading instruments, commercial banks offer financing channels to enterprises and guide customer demand through product innovation. Especially in maintaining market order, purifying the market environment, and improving the security of bills as a credit instrument, commercial banks have an inescapable responsibility.
ICBC has always played the role of a leader in the standardization and development of China's bill market, setting an example in institutional changes, business innovation, and standardized operations, especially in risk management. Through measures such as establishing specialized institutions, improving operational networks, implementing entry-level operations, and internal transfer of bill management, ICBC has pioneered an effective and successful path, achieving significant economic and social benefits.
Under the leadership of Vice President Wang Lili, the Department of Capital Operations of ICBC organized key personnel to compile the book "100 Questions on Risk Management of Bill Business in Commercial Banks," combining the successful experiences and lessons learned from our bank's bill business management in recent years, as well as beneficial practices from domestic and international bill business operations. The book is written in the form of knowledge questions and answers, targeting management principles, business processes, operational key points, and case analyses, providing practical solutions to real-world problems in bill business risk management. It closely integrates theory with practice, offering important reference value and practical significance for commercial banks operating in bill business.
This book has three distinct features: First, a new perspective, it is the first to comprehensively describe the process of bill business operations from the perspective of risk management, enabling bill business professionals to quickly understand and grasp the key risk points. Second, a new structure, it elaborates on the risk management process of bill business in a streamlined and comprehensive manner, covering the entire process of bills from generation to dissolution within commercial banks. Third, a new format, it adopts an innovative Q&A format, making it easy for readers to find and solve problems targetedly. This book can serve as a valuable guide for bill business operators and managers to direct operations and strengthen risk management.
China's bill market, after its initial incubation and rapid development, is now in a new important historical period of incubation, selection, adjustment, and decision-making. Its sustainable development is rooted in the foundation of social credit, relies on institutional innovation paths, and is supported by policies, laws, and technology. Modern commercial banks operating in bill business must maintain a clear understanding of risk management while having a correct understanding of promoting bill business development. They must closely grasp the favorable development opportunities brought by changes in macro policies, proactively address the impact of short-term loan billization, effectively prevent and control bill business risks, eliminate various negative factors restricting business development, and establish a scientific development outlook.
In establishing an efficient risk management mechanism and scientifically identifying, defining, assessing, and effectively preventing, controlling, and resolving bill business risks, there is still much work to be done. We believe that the publication of this book will undoubtedly provide important intellectual support for the standardized development of China's bill market and make its due contribution.