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In commercial credit, this usually means the risk adjusted profit divided by risk adjusted capital.Risk-adjusted profit would mean you take your price (interest plus fees if applicable) and deduct costs and loan loss provisions. The last one is a risk measure which is the amount the bank has to set aside to provision for the likelihood that the customer won't pay back within a year.Risk adjusted capital is the amount the bank sets aside for unexpected losses. The calculation typically follows regulatory requirements and the bank's internal risk models. For further detail, it would be good to go to Bank for International Settlements (BIS) papers for the rules on capital calculation.What is the motivation for Return on Risk Capital? When you make a deal or sell a commercial loan, or when you form a financial strategy, you want to earn on top of the capital you set aside. This is not the only metric banks used for pricing or entering a deal but this is major consideration.

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There have been some confusion and myths about how the Social Credit System (SCS) works.The system is accused of being a statewide surveillance apparatus that categorizes citizens in a way that could cause discrimination and violate their human rights.Actually, the Chinese word "credit" – xinyong (信用) – basically means the ability to not only fulfill one's financial and legal obligations, but also uphold honesty and integrity. In this context, a more accurate word should be “trustworthiness.”Government credit systemThe government-led SCS is mandatory with real-life repercussions both financially and socially.The People's Bank of China (PBOC) launched the Credit Reference Center in 2006 and then expands its consumer credit coverage by authorizing eight commercial companies to roll out their own financial credit scoring systems, such as Zhima (Sesame) Credit developed by Alibaba's Ant Financial.So how PBOC’s credit report works?“This personal credit report used to be required only in debit card applications, getting a loan, and other commercial situations," Feng Weiwei, an officer of the Credit Reference Center in Beijing told CGTN. "However, in recent years, the report is required in employment interviews, getting job promotions and registering certification exams."In 2018 alone, the number of personal credit report inquiries reached 1.05 million.Feng also stressed that "all the information recorded in the credit system is from commercial institutions, which are authorized to share the information of their customers."For those who seriously break the rules, known as “laolai”（老赖）, will be named on the List of Dishonest Persons Subject to Enforcement by the Supreme People's Court. They are unable to travel on planes and high-speed trains in China. People with low ratings will also be restricted from entering high-end restaurants, nightclubs and even golf courses.Like the blacklist, a red list to honor the trustworthy is also available through the Credit China website.Commercial credit systemZhima Credit is widely considered to be a precursor for, and often confused with, the planned official SCS. The good-credit users enjoy many advantages like the waiving of deposits in bike and car rentals, fast-tracked visa applications and even more matches on dating sites.CGTN reporter Liu Chen used her personal Zhima Credit to test the existing credit system, and she successfully rent a bike and a car without needing to leave a deposit."For people who are like me, who don't own houses or cars, and who don‘t have credit cards, traditional banking data isn't enough to measure our financial situation," said Chen. "This helps me to access more social services. It removed obstacles, and encouraged me to try things out."What all of this looks like is a loyalty scheme rather than anything that can meaningfully reflect people's trustworthiness.A 2018 study led by Dr. Genia Kostka at Frerie Universitat Berlin found an overwhelming 80 percent of Chinese Internet users hold positive views of the SCS, with particularly high-level of approval reported among high-income, urban and university educated respondents.Beijing looks to establish a national social credit system (SCS) by 2020. The SCS, built on a vast amount of information collected by different state authorities, financial services and various levels of government, will help provide guidance for business activities and plug some regulatory gaps in China's developing market economy.My vlog: Social control or social credibility? CGTN reporter tests China’s credit systemThe truths and myths about China's social credit system