On China's Commercial Banks' Interest Rate Risk Management

As the proceeding of the interest rate marketing reform, the interest rate risk China commercial banks face will vary a lot in quantity\form and substance, the cause of risk will be more complex, the risk moment and sort will get more, these will present an austere change to China's commercial banks' interest rate risk management. How to measure and control the interest rate risk efficaciously so as to improve the operating results has caused more people to consider it, it also is an important and urgent problem to resolve. This paper first analyzes the interest rate risk China commercial banks face, then advances the strategy, measure methods and realistic measures of China's commercial banks' interest rate risk management.Chapter one introduces the background of China's commercial banks' interest rate risk management, and reviews the studies of the interest rate risk management in China and foreign countries. As the interest rate policy in China has been controlled for a long time, and the interest rate risk has never been considered by China's commercial banks, but the interest rate marketing reform in China is necessary, so China's commercial banks should make prepare for it and build and improve the system of the interest rate risk controlling. Also, strengthening the interest rate risk management is the objective require of heightening the commercial banks' operational results. Although the theory of the interest rate risk management in foreign countries get more mature since late in 1970s, the scholars in China began to study the interest rate risk after the first interest rate fall-adjustment in 1996, but their studies is not all-round. What kind of interest rate risk management strategy should China's commercial banks take? Whether or not is there a set of interest rate risk measuring guideline?Chapter two analyzes the interest rate risk China's commercial bank face. Now, China's commercial banks not only face the common interest rate risk-re-pricing risk, yield curve risk, basis risk and option risk, but also face the special risk of the phase of the interest rate marketing reform, the phase risk mainly is the non-compatibility of the abnormal varying interest rate conditions in the first phase of the interest rate marketing reform. The independence of central bank's interest rate policies, the un-thorough of the economy framework reform and China's financial deepening are the external causes of the interest rate risk China's commercial banks face; And the internal causes are the non-equilibration of asset/liability management, non-proportion of the interest rate option right and non-compatibility of the interest rate marketing reform. Saving andloans are the largest capital source and disbursement item of China's commercial banks respectively, and the proportions are very high, this makes commercial banks depend more on the net interest income and the variation of the interest rate significantly effect the commercial banks' operational results. The central bank has fallen the interest rate eight times since 1996, one-year saving interest rate fell 1.125% per time average, and one-year loan interest rate fell 1.09% per time average, especially in the time form 1996 to 1999, both the frequency and breadth of the interest rate re-adjustment are very high, this made China's commercial banks face a lot of interest rate risk, but they didn't know how to manage the interest rate risk and the consciousness of the interest rate risk management was very flimsy.Chapter three introduces the mature experience of foreign commercial banks' interest rate risk management. The skills of interest rate risk management in foreign commercial banks contain the financial plot model, gap management and asset portfolio management, and as the use of the computer technology to the commercial banks' operation, simulate analysis is also used to the interest rate risk management. When the commercial banks have the necessary skills of the interest rate risk management, they must know what kind of interest rate risk manag...