1.3.3 excessive government interventions
Recent research has proved that the local governments’ intervention is one of the main causes of credit risk. Since the 1980 s, the many bank credit funds have flowed into government finances, and capitalization phenomenon has appeared frequently. So it is commercial banks that primarily take the risks from markets and investments. In China, branches of commercial banks are established according to the administrative regions, and, consequently, banks located at different areas are subject to the local government meaning that it increases the possibility of government interventions. Administrative interferences make the autonomy of banks in loans seem impossible. To some points, banks are sacrificed for continually supporting government fiscal funds and transferring management risk from enterprises to themselves. More severely, some local governments even link the local financial development to the quantities of bank loans. Therefore, in order to achieve more over their careers, most civil servants eager to compel banks to loan more. As soon as a bank lends out, it will be like felling into a bottomless pit, because these items are usually paid by local fiscal funds, and fiscal deficits almost happened on these local governments every year. However, if the bank puts an end to the loans, it will generate harms that more than the bank can bear. Thus, the bank has no choice but delays the repayment or asks the enterprises for recapitalization. Because of the excessive interventions of local governments, there emerge a large number of irregular loans, greatly increased the bank's credit risk.