Interest Rate Management Of Chinese Commercial Banks In The Financial Deepening Process

In the background of financial globalization, the process of financial deepening in China is promoted step by step and will be going on steadily. As part of the financial deepening process, the market-oriented reform of interest rate system will increase the frequency of interest rate fluctuation as well as widen the range of it, which would make Chinese commercial banks be faced with serious interest rate risk. It is urgent to improve risk management capacity of Chinese commercial banks, which are playing dominant roles in Chinese financial system.The financial deepening is unavoidable in the economical and financial development. Although not having long history, financial deepening in China did make progress. However, it lead to more risks, especially interest rate risk, including high-rate risk, adaptation risk, reprising risk, basis risk, optionality risk, yield curve risk. Financial deepening has positive effect as well as negative influence on Chinese banks'interest rate risk management. Now Chinese commercial banks need to improve in risk-control concept, system and management.In the past few years, foreign banks have developed a series of risk management techniques and skills that we should pay attention on. Nowadays, it is proper for our commercial banks to choose interest rate sensitive gap, duration gap as main methods and try stress testing and other senior techniques gradually considering propriety and cost.Besides the risk-control methods, Chinese commercial banks should perfect market risk-control system structure, make cooperation polices and using on-sheet and off-sheet methods, especially financial derivatives, to control interest rate risk. In the long run, Chinese commercial banks should carry out a number of strategies on improving risk consciousness, income structure, ability of pricing, capacity of deposit and loan administrating and asset liquidity to achieve the goal of safety as well as profitability.