OREANDA-NEWS. May 23, 2011. In the recent years while expanding credit card market aggressively with continued innovations in management philosophy and means about credit line authorization for credit card holders, ICBC has achieved accurate credit granting and sophisticated management. Changes have been taken place in checking credit instead of checking income, automatic approval instead of manually, proactive and accurate credit line authorization instead of passive and unclear authorization. As a result, the Bank has successfully instituted the most advanced and complete system for granting credit to credit card holders, and significantly raised its core competence in credit card business, reported the press-centre of ICBC.

Since the kick-off on the reform of credit granting management in 2008 to 2010, ICBC's non-performing rate of credit card loan has declined drastically, to 0.88% by the end of first quarter this year. Effectiveness of credit card risk control stays at international advanced level. Over the past few years, major card-issuing banks in the world witnessed a surge in the loss rate of credit card loans due to the impact caused by global financial crisis, as shown by Citibank and Bank of America, whose loss rates of credit card loans were respectively 9.03% and 11.25% in 2010 from 2007's 4.65% and 4.79%.

In terms of winning customers and granting credit to them, the accurate customer positioning and precise judgment on credit line help ICBC change from passive to active. The Bank has jacked up the card issuance volume and card expenditure amount by reasonably granting credit line to the top-quality credit card holders. ICBC remains as the largest card issuer in the country and world's fourth largest by issuing 66.66 million credit cards up to the end of first quarter this year, with cardholder expenditure volume reaching RMB 203.5 billion in one quarter. Meanwhile, less credit granting steps and fully automated credit line authorization in the whole process translate to much higher efficiency in processing credit card application. Customers warmly welcome the fast service provided.

Being the most front-end "firewall" in preventing credit card risk, effective management on credit line authorization is always fundamental to the healthy growth of credit card business, said an executive with ICBC. Before 2008, commercial banks in China mainly used proof of personal income as the criterion to grant credit to the cardholders. However, on one side it is difficult to determine the truthfulness of the paper proof supplied by the third-party. On the other side, real top-end customers cannot apply for credit card because of their unwillingness to produce proof of income. In view of this, ICBC has started the reform on the policy about granting credit to credit card holders since 2008. Cardholder's personal particulars are used as the base instead of checking the proof of income supplied by the third-party. Transaction records of the applicants are the core, approval on granting credit also references the basic qualities of the applicants. Focus is on the ability and intention of the cardholders to repay, which facilitates ordinary customers with good credit records to apply for credit cards.

Based on this, ICBC, once again, is the first bank in China to adopt Basel New Accord's Advanced Measurement Approach to evaluate credit granting to credit card holders. Internal rating-based approach on retail assets has been applied to credit card business. The step of internal rating and scoring is embedded in the credit card approval system in order to include all the details of customers (personal particular, asset, loan, credit card, credit investigation) into the scoring model. System will automatically approve according to the scoring result. Bad customers are filtered out. This new measure has effectively addressed the issues of higher cost and low working efficiency brought by the information asymmetry, driving the data processing of granting credit to credit card holders and quantitative management of credit granting standard.

At present, ICBC has established a comprehensive credit granting system for credit limit authorization to personal customers, in other words the consolidated credit line for all loans or highest line of credit granted to personal customers. Customers use credit card to borrow within the credit line. In terms of personal consolidated credit line, ICBC makes "pre-approval" on the line of credit for every credit card holder. Customers can apply for increasing the limit anytime within this "pre-approval" limit. Meanwhile, ICBC leverages its best-in-class technology to set up a new management model in granting credit based on the transaction records and cash flow of the customers using the latest customer star-class evaluation system. The new evaluation system can automatically screen and assess customers' three large categories of data: financial assets, liabilities and intermediary business. The star-level of the customers is based on the overall contribution and transactions of the customers. Through the inclusion of customers' effective data into the credit card "pre-approval" database, the automatic approval and accurate credit granting to all target customers represents a leap in quality in the management of granting credit to credit card holders. It also addresses three big long-term issues of the banks: determine the line of credit to top-quality customers, "grant credit to who" and differential risk control.