The Management Of Interest Rate Of Our Commercial Banks During The Process Of Interest Rate Liberalization

Interest rate liberalization is the key to realize economy and finance liberalization. And also it is the need of accessing to WTO. The reform of the interest rate liberalization has become the most important one in financial system reforms. During the process of interest rate liberalization, the interest rate will change continually, so the interest rate risks will become the most important risks of commercial banks'. How to identify, measure and manage the interest risks will become the most important subject of commercial banks. This thesis analyses the above mentioned aspects. Chapter one defines some concepts on interest rate liberalization. First, it states the meaning of interest rate liberalization and the necessity of country. Then it discusses the influence of interest rate liberalization for our commercial banks both in positive and negative sides. Because our financial market and commercial banks is faultiness, the negative function may be more, interest rate risk is inevitable. Chapter two makes an analysis of the risk which the commercial banks have to face in the changing interest environment. It points out what is interest rate risk and divided the risk into temporary risk and permanent risk. The temporary risk is brought by the change of the central bank's management regime, while the permanent risk rises from the internal interest rate risk management of commercial banks. The permanent risk includes reprising risk, yield curve risk, basis risk and optionality risk. Chapter three introduces the method of interest rate risk management. First, the commercial banks should measure the risk. This chapter introduces three methods of measurement in western commercial banks, i.e., sensitive gap analysis, duration analysis and the value at risks. After identifying and measuring the interest rate risk, the commercial banks will use two methods to avoid and control interest rate risk .One is asset-liability management, and the other means is using derivatives to control the interest rate risk. Chapter four discusses the practical risk management strategies which can be used by our commercial banks. There is much deficiency on the financial environment, financial market and our commercial banks, so the risk management of western commercial banks can not be used directly. Our commercial banks should centralize management to avoid the interest rate risk and enhance benefit of commercial banks. Besides, bank should development derivative financial instruments to avoid interest rate risk.