Research On Commercial Banks' Liquidity Risk Management Of China

The problem of liquidity risk management has always been a key and difficult one in the field of commercial bank's risk management. The failure in solving the problem of liquidity risk may lead to not only bankruptcy but also financial crisis and break down of the whole national economy.Since 1990s, affected by the structurality expansion and the bad quality of our credit assets, commercial banks of our country have had the insufficient problem of liquidity and faced the comparative large liquidity risk, which aroused people's big attention in both theoretical and practical areas. At the same time a large number of research literatures emerged. But these years, from the indexes, we can know that the liquidity of commercial banks of our country become enough even excess. So that people believe there is not any liquidity risk of our commercial banks any more. Then the attention to the problem of liquidity risk management by commercial bank's diverted and the research papers reduced. This article consider that now, for our country's commercial banks, this good liquidity performance, reflected by liquidity indexes, doesn't mean we can't be lack of liquidity any more, and it's also very important for us to further our research on the problem of liquidity risk management by commercial bank's of our country.Fundamentally, the scale of a commercial bank's liquidity risk is decided by two aspects. The first aspect is the liquidity condition of the banking system of a country which is the macro aspect; the second aspect is the ability to manage liquidity risk for a commercial bank itself, which is the micro aspect. In our country, on one hand, though the banking system appears steady surplus these years, there is also potential liquidity risk, and taking a long view, we can't make sure that the potential risk won't break out one day; on the other hand, there are many problems in the liquidity risk management by commercial banks of our country. The management level is so low that once the macro surroundings deteriorate, the commercial bank will be revolved in a terrible liquidity crisis. Consequently, we, Chinese commercial banks, have to treat our good liquidity condition correctly, introspect the problems in our liquidity risk management actively, be prepared for danger in times of peace, and improve our liquidity risk management level practically, in order to deal with the unexpected liquidity pressure when the macro surroundings reverses.We separate this article into five parts to discuss some closely relative subjects. The first part introduces the concept of liquidity and liquidity risk, as well as the formation of liquidity risk, and also the development of liquidity risk management theories. In the second part, through citing the example of liquidity risk management by banks of German, America and Hong Kong, we state the general methods to manage liquidity risk for a commercial bank. In the third part, we analyze the liquidity condition of our country's banking system from five angles, including the difference between deposits and loans, the excess reserves ratio, and the funds supply and demand in inter-bank market, the term structure of assets and liabilities and the assets quality. We point out that at present there is also potential liquidity risk in the banking system of our country though the liquidity excess. The condition of liquidity excess can't be last forever, and our commercial banks may still endure strong liquidity pressure in the future. In the fourth part, we analyzed the status of the liquidity risk management by commercial banks of our country, with the purpose of evaluating the ability and level of liquidity risk management by commercial banks of our country. At last, be concluded that we still have many problems on the mentality, idea, self-control, instruments and regulation of liquidity risk management. In the last part, we put forward some proposals according to the problems we have showed before.