lenders do not pay principal and interest back to the banks and the banks do not pay the investors who buy the securities based on the loans.From the example,we can find that there are still credit risks,though banks have developed many financial innovations to manage risks. B.Sharing Knowledge
Knowledge in banks includes tacit knowledge and explicit knowledge,which is scattered in different fields.For example, the information about the customers’income, asset and credit is controlled by different departments and different staffs and the information can’t be communicated with others. So it is necessary for banks to set up a whole system to communicate and share the information and knowledge to manage the risks. C.Setting up Incentive Mechanism and Encouraging Knowledge Innovation
The warning mechanism of credit risks depends on how bank’s staffs use the knowledge of customers and how the staffs use the knowledge creatively.The abilities of staffs to innovate depend on the incentive mechanism in banks,so, banks should take out incentive mechanism to urge staffs to learn more knowledge and work creatively to manage credit risks.We can show the incentive mechanism as Fig.1:
? Yellow-card warning ? Red-card warning ? Dismissing or laying-off ? Wealthy rewards ? Training ? Promotion Punitive measures Stimulative／punitive measures Indirect contribution Measuring knowledge Direct contribution Stimulative measures
Fig.1 The model of incentive mechanism with knowledge management
From Fig.1,we can see there are both stimulative and punitive measures in the incentive model of knowledge management for financial banks.With the incentive mechanism of knowledge management in financial banks,the staffs will work harder to manage risks and to acquire both material returns and spiritual encouragement.
III.MANAGING CREDIT RISKS IN BANKS WITH KNOWLEDGE
MANAGEMENT
There are four blocks in managing credit risks with knowledge management.We can show them in Fig.2:
Managing credit risks and feeding back Reducing credit risks Distinguishing risks credit Assessing and calculating credit risks Fig.2 The blocks of managing credit risks
A.Distinguishing Credit Risk
Distinguishing credit risks is the basis of risk management.If we can’t recognize the risks,we are unable to find appropriate solutions to manage risks.For example,the United States subprime crisis in 2007 was partly caused by that the financial institutions and regulators didn’t recognize the mortgage securitization risks timely.With knowledge management,we can make out some rules to distinguish credit risks,which are establishing one personal credit rating system for customers and setting up the data warehouse.We can use the system to analyze customers’credit index, customers’credit history and the possible changes which may incur risks.At the same time,we should also watch on the changes of
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