The Conflict About Liquidity Management Between Central Bank And Commercial Banks: 2003-2009

Liquidity is regarded as lifeline of commercial banks. It is not only a vital aspect of the safety of single commercial bank, but also very important to the stability of the whole country and global economy. During Asian Financial Crisis in 1997, liquidity crisis occurred due to customers" running on a bank in many countries, which led to the bankruptcy of many commercial banks and financial crisis in lots of regions and countries. In last two years, the financial crisis caused by sub-prime mortgage crisis deteriorated and quickly penetrated capital market, money market and credit market. It is lucky that domestic banks did not participate in international market deeply and is isolated to the capital market, furthermore regulatory authority executed valid policies to supervise, so the domestic commercial banks was not impacted badly and just got limited loss directly. However, because of the finance globalization and impact of finance on the real economy, domestic commercial banks are facing more risk and pressure to get profit. From 1980s, commercial banks attached unprecedented importance to the liquidity. That is because several times of financial crisis whose characters all are the liquidity's vanishing.Now the existed essays have had far-ranging study to the root to which the liquidity gave birth and factors which influenced banks' liquidity. The inflexion, commercial banks' liquidity changed from over-plus to shortage, may come forth resulting from something's happening and come into being liquidity crisis finally. And this kind of exchange may be prompt. We need to do farther research to the influence of relevant factors on commercial banks' liquidity. While, it is still necessary to study the relation between macro-economy's liquidity and banks' liquidity. Besides, we must do more work to learn about how the commercial banks can maximize their own profit when they try to adapt economic environment and carry out monetary policies. We set the definition of the commercial bank liquidity in this essay, the same time expatiate the basic macro management theory based on accurate setup of basic definition. The hardcore is the model of reserve management which helps commercial banks to control the liquidity. Although the central bank and commercial banks set different measuring standards about various aspects influencing commercial bank liquidity, hereby this thesis takes them into the reserves management model to draw a conclusion by integrating the real situation of China. It means that the commercial banks can maximize their own profit while they try to adapt economic environment and carry out monetary policies. Then the influencing degree of relative factors which impact on optimum reserve rate, is summed up through their regression analysis based on commercial bank profit maximization. Finally, we bring a conclusion that banks must improve their liquidity management system in order to coordinate relationship between policy execution and their own maximized profit. And it will be convenient for the government to provide better policy support and financial environment.