Establishment and Application of Grey Prediction Model for Overdue Loan Risk in Financial Institutions

The rapidly increasing ratio of overdue loans in Taiwan’s financial institutions during the last seven years is a phenomenon that should not beoverlooked . Therefore, a comprehensive overdue loan risk prediction model for financial institutions is urgently needed, and could facilitate financial institutions managers by government authority in promptly identifying where problems exist and then taking appropriate countermeasures. The study adopts GM (1,1) of the Grey theory combined with the model to measure overdue loan risks to construct model for predicting overdue loan risk, The financial institutions under the jurisdiction of the Kaohsiung Municipal Government in Taiwan are used as examples to verify the usefulness of the constructed overdue loan risk prediction model in ensuring complete and sound credit loan strategic management for financial institutions. Subsequent research could adopt technological integration to combime economics, financial management, psychology or the prediction theories and methods of other applied sciences to improve the quality of decision-making and financial risk management.