Interest Rate Marketization And Interest Rate Risk Control Of Commercial Banks In China

With the deepening of interest rate marketization, the interest rate risk will become one of the major risks of commercial banks. In china, the commercial banks have not pay enough attention to interest rate risk, and also have no corresponding methods and instruments to manage the interest rate risk because of the long-term regulation of interest rate. So after interest rate marketization, the management of the interest rate risk will become an important task of commercial banks. This paper is focused on how to control the interest rate risk of commercial banks. On the basis of analyses the interest rate theory, this paper elucidates the inevitability of interest rate marketization and the interest rate risks that the commercial banks will face, then studies the measurement and the control of the interest rate risk in china and puts forward some suggestions on how to construct the interest rate risk management system.This paper consists of three parts. The first part is about the interest rate theories. This part introduces three popular interest rate theories in the view of history. Basis on the definition of interest rate marketization, this part expounds the dependence of interest rate marketization by the way of analyses the theory of "financial deepening". The second part expounds the measurement and management of the interest rate risk. This part emphasized that the commercial banks in china will face to reprice risk, basis risk, yield curve risk and embedded option risk. This part also introduced the interest sensitive gap model and the duration gap model which have been widely applied by commercial banks, and discussed the applicability of this two model in china. The third part discusses the basic method of interest rate risk management. There are two methods for commercial banks to control interest rate risk: one is assets and liabilities management which basis on the technology of interest sensitive gap and duration gap; another way is use derivatives to control interest risk. At last, this part discusses the construction of the interest rate risk system by interior control an exterior supervision.