Research On Efficiency Of Asset-Liability Management During The Process Of Liberalization Of Interest Rates

With the constant deepening reform of liberalization of interest rates, as well as market forces play a decisive role on the interest rates, the uncertainties have a tremendous impact on state-owned commercial banks which are transit from the planned economy system and the new joint-venture commercial banks, and profoundly change the financial environment and survival principle of commercial banks. Therefore, the management of interest rate has become more and more important for commercial banks in China and assets and liabilities management of which that increasingly highlighted in order to interest rate risk management has become a core part will face new opportunities and challenges.Under the circumstance of liberalization of interest rates,the interest rates were mainly decided by market supply and demand, frequent fluctuations in interest rates will affect the profit margins of commercial banks, change the pattern of interests, increase the operating risk of commercial banks. The original asset and liability management model and means will not meet the requirements of asset-liability management under the market-oriented interests.On the background of the gradual reform of liberalization of interest rates, concerning the issue of rate risk management for commercial banks in China, this paper combined with the actual situation of commercial banks in domestic, learning from the experience of Western commercial banks in asset-liability management, analyze the matching situation of assets and liabilities and the efficiency of assets and liabilities management for domestic commercial banks.This artical brings up the following questions, as the research objectives of this article: (1) In the process of the reform of liberalization of interest rates, how is the risk of interest rate and what are the duration characteristics of Chinese commercial banks?(2)Will the efficiency of asset-liability management be higher with higher degree of liberalization of interest rates and how is the characteristics of match-period? This article is divided into five parts. The first part is Introduction part. On the basis of the reality of domestic commercial banks, this paper elaborates the background of the research, the significance, the domestic and foreign literature summary, and makes a simple introduction of the article research mentality. The second part makes a brief introduction on the theory of Asset Management, the theory of Liability Management, the theory of Asset and Liability Management (ALM) and the development of this theory. In the third part, elaborates the concept of liberalization of interest rates and the theory of the reform of liberalization of interest rates, sum up the process of the reform of liberalization of interest rates and its characters, and then analyze current development of Asset and Liability Management in domestic commercial banks. The fourth part is empirical study which is the most important part, including chapter 4 and chapter5. Through the interest rate sensitivity gap analysis model, analyze the gap between Interest Rate Sensitive Asset (IRSA) and Interest Rate Sensitive Liability (IRSL);By Flannery financial parameters model, discuss whether the efficiency of asset-liability management in domestic commercial banks has been improved during the process of reform of liberalization of interest rates. The fifth part is the conclusion. According to the results of empirical study, sum up the conclusions and pick up some suggestions.(1) Under the circumstance of liberalization of interest rates,Chinese commercial banks still appear negative interest rate sensitivity gap state.According to the interest rate sensitivity gap analysis model, it shows that one-year interest rate sensitivity gap is negative for the majority of sample,appearing a negative interest rate sensitivity gap state. This is in line with Zhao Bing's (2004) opinion that the assets and liabilities structure of Chinese listed banks has chaned into a negative interest rate sensitivity gap state.Generally speaking, the bank's funding gap greater the absolute value (whether positive or negative), the risk of commercial banks is higher. Therefore, we should minish the negative gap,to increase the interest rate sensitivity of assets, or reduce the interest rate sensitive liabilities, or both of them. To make the gap smaller papers put forward the following strategies:1) The adjustment strategy on maturity structure of assets and liabilities If Chinese commercial banks want to change the situation of large negative gap they should take the initiative to interest rate adjustments based on a combination of assets and liabilities, the implementation of a diversified asset management, reduce the proportion of loan assets. Liability management to strengthen and broaden the financing channels, the sensitivity of assets through different between the conversion, to prevent fluctuations in interest rates brought about by the substantial changes in the balance.2) loan pricing strategiesWith the constant deepening reform of liberalization of interest rates, commercial bank have more rights to price loan, pricing strategies can be used to adjust the gap. Through the ingenious development of lending rates, interest rates set to increase interest rates to adjust the sensitivity of assets, thus reducing the gap, and ultimately reduce the commercial banks interest rate risk.3) financial derivatives strategyThrough the use of interest rate swaps and forward rate agreements and other financial derivatives, interest rate sensitivity can be adjusted at the same time the interest rate sensitivity of assets and liabilities, so that the interest rate sensitivity gap become smaller, so as to achieve the purpose of interest rate risk to avoid.(2)For short-term the period of assets and liabilities match the structure better, but for long term does not match the maturity structure.Chapter IV of the paper empirical results can be seen, with the exception of Bank of Nanjing, the one-year interest rate-sensitive coefficients are near 1, which describe the one-year sample of bank assets, liabilities better match. However, in Chapter V there are four sample banks in the average maturity of assets and liabilities of the larger difference between the average maturity date, assets, liabilities underscores the maturity mismatch. To improve the assets and liabilities do not match the duration of the status quo, can be adjusted in certain items of assets and liabilities from interest rate adjustments on the time to adjust the duration of assets and liabilities structure.(3) In the process of reform of liberalization of interest rates, interest rate fluctuations have little effect on profitability of banks in short-term.Interest rate sensitivity gap analysis model and the financial parameters of the model Flannery empirical results show that the volatility in interest rates on bank net profit was less affected. Chapter IV The empirical results show that the interest rate of 0.27 percent decline in net profit impact of a sample bank of not more than 5% of the maximum, minimum is only 0.38%. Chapter V The empirical results indicate changes in interest rates on the same sample of banks influence short-term profitability. Therefore, the process of market-oriented interest rate asset-liability management and interest rate forecasts are not significantly improve the profitability of banks, while banks in the sample also shows that interest rate forecasts and asset-liability management problems still exist. Therefore, China's commercial banks should actively expand its market, the level of risk prevention, the introduction of foreign advanced asset-liability management models and technologies, the establishment of the Bank's assets and liabilities for management decision-making system.