A Study On The Interest Rate Risk Management Of China's Commercial Banks

Along with the development of market economy, finance has become the centre of the modern economy. Being the price of fund, interest rate plays a more and more important role in the financial market. In the late seventies to eighties, the occidental developed countries had been slacking off financial control successively, interest rate became market oriented, giving rise to its fluctuation, which had significant impact upon the stability and acceleration of the bank's profit. Facing the interest rate risk, commercial banks in the west had to strengthen up the management to the interest rate risk. Thereafter, Interest Rate Management (IRRM), an important management theory and tool to the modern commercial banks was born.The financial system reform of China oriented to the interest rate marketability direction advances with steady steps at present. The interest rate is leasing from the original strict control to finally the market decision, and the financial market is also in the process of transformation from lack of the competition, to the intense competition, finally to perfect competition. The major business of commercial banks of China is related to the loan service. With the change of interest rate, commercial banks of our country are prominently faced with the interest rate risk question. However, on the one hand, commercial banks of China lack common sense of interest rate risk. On the other hand, research on the interest rate risk is less mature and the interest rate risk management lags behind practice. Therefore, commercial banks of China are badly in need of a set of comprehensive management system, to monitor, measure, supervise and control the interest rate risk.Interest rate risk management has become the focus of modern commercial bank risk management. Whether China's commercial banks can quickly shake off the impact of changes in interest rates to become the modern market-oriented interest rate commercial banks or not has an impact on not only in their own survival and development but also economic relations between the healthy operations of the financial system. It is precisely because of this, the paper to interest rate risk management theory, to interest rate risk management objectives as a guide, analysis of the interest risk which may faced by the commercial banks in the market-oriented interest rate reform process. The interest risk mainly come from the loan-to-deposit maturity structure does not match, the inter-bank competition intensifies, the adaptability to changes in interest rate and institutional issues. The paper at the same time analysis China's commercial banks interest rate risk management of the status quo, mainly to frequent fluctuations in interest rates, the lack of an effective interest rate risk management mechanism, the lack of the tool to effectively control and to avoid interest rate risk, and so on the issue. The process that China's financial industry really market has lagged behind, both the theory and practice are relatively late start. China on the interest rate risk and its related issues are basically still in the research on foreign theories and methods stage. Based on the analysis of several interest rate risk measurement methods and also the reality of China, the paper analysis the models which suit to the choice of China's commercial banks.Finally, this paper qualitative and quantitative analysis on the basis of China's commercial banks for interest rate risk management of the status quo and raise the optimization of interest rate risk management policy recommendations for China's commercial banks.