A Study On The Impact Of Exchange Rate System To The Commercial Banks Of China

On 21st July, 2005, our county started to practice controlling and administrative floating exchange rate system which was based on the supply and demand of market and referenced to a basket of currencies. Subsequently, the Central Bank and the State Administration of Foreign Exchange carried out a series of policy and measures to improve the exchange rate forming mechanism and increase the momentum of capital flow.Starting of foreign system has a profound effect on domestic commercial banks. The exchange rate risk which has been taken by the country for a long term is taken by the holder of foreign exchange instead. Our commercial banks have to face the exchange rate risk themselves. Meanwhile, the credit business and intermediary business also got a certain impacts because of the reform. The impact and the referring suggestion in risk management and business operation of commercial banks in china are expounded in systematic in this paper, with the hope that it will be helpful in improving the ability of commercial banks to cope with exchange rate risk and the capacity of business operation and management.On the basis of studying relative theory and the concrete practice of exchange rate system, this paper adopts the research method that empirical study is combined with standard study. Firstly, the paper discusses the impacts in foreign exchange liquidity risk, exchange rate risk (including transaction risk, translation risk and economic risk) of commercial banks; Secondly, the paper discusses the impacts to the business of our commercial banks including the loan business, international settlement business, wealth management business and foreign exchange derivatives business. Thirdly, the paper gives out some targeted suggestions such as optimizing assets and liabilities of the foreign currency, improving foreign exchange risk management mechanism, developing wealth management offshore business, constructing derivative market.