How Commercial Banks Face Interest Rate Liberalization

Since the financial development and financial deepening theory was advanced, interest rate liberation tide that interest rate level is determined by the relation between supply and demand in the capital market sweeps across the whole world. Several developed countries such as USA and Japan, and several developing countries and regions such as Latin America and Asia carry out interest rate liberation reform one after another. Every country deregulates interest or abolishes the regulation of interest in different degree. This article researches systematically long, gradual interest rate liberation process with various financial innovations in USA, interest rate liberation process and the impact on financial institution in Japan, interest rate liberation process and the impact on financial institution in several countries of Latin America, interest rate liberation process and the impact on financial institution in some countries and regions of Asia, and the advantages and disadvantages of the method of phasing interest rate liberation in Taiwan.Based on learning from lessons of other countries, and under the guidance of interest theory of Keynesian school, and related classical theory such as the financial development and financial deepening theory, interest rate liberation in China is being carried out. Based on different stages and different interest institutional factors, this article researches interest rate liberation process in China. As a whole, interest rate liberation process in China is divided into four stages. In every stage, every institutional factor has different reflections, for example, interest rate level, interest rate structure, formation mechanism, management mechanism, the impact of interest rate on investment, the impact of interest rate on savings, and the relationship between interest rate and macro economy. The same as other countries, in the interest rate liberation process, commercial bank reprehensive of financial institutions will be confronted with various impact, competition risk, credit risk, and interest rate risk is the most dangerous factors to every part. This article is in the research under this background.This article reviews basic theory of interest rate liberation, including the theory of interest rate determination, the theory of interest rate structure, and the theory of interest rate risk management. The academic classical findings not only provide rationale behind the relation between financial developments and economic development, but also make history for the study and deepening of interest rate liberation. Then based on this, by discussing the meaning of interest rate liberation, the review of research situation at home and abroad, and the process of interest rate liberation at home and abroad, analyzes the risk faced by commercial bank in the interest rate liberation process from various angles, and puts forward the suggestions.The interest rate liberation is a whole process. The study on the risk faced by commercial bank in the interest rate liberation process and the settlement institution, is beneficial to strengthen the ability of resisting risk of commercial bank, is beneficial to carry forward the interest rate liberation reform, and is beneficial to keep financial system steady and promote healthy development of economy. For reducing the impact of interest rate liberation on commercial bank in China purpose, the article puts forward several suggestions that commercial bank in China reply on interest rate liberation: first, set up perfect interest rate risk management institution, at the same time, implement asset-liability management model around interest rate, and train interest rate risk management personnel; second, develop intermediary business, attach great importance to financial innovation, and intensive management strategy should be in operation; finally, build scientific and effective financial products pricing system, perfect financial market external mechanism.