Commercial Banks Excess Liquidity

Bank is the core of finance sector which is the core of the economy. Therefore bank's operation has been focus of government and scholars. Among the basic three targets of bank operation, Liquidity is the most important. In the years before the end of 1990s, deficiency of liquidity had been the major problem of China's banks because of credit inflation and bad credit quality under the planning system. However, in the 21 century, the situation seems return around. Excess liquidity is emerged slowly under the loose monetary circumstance. We find China's commercial banks are keeping excess liquidity by using liquidity index method. The excess liquidity effects China's assets price, monetary policy, bank's risks. But it also a good chance to develop interest rate shaping system and market system. A large number of foreign exchange storage, great anticipation of RMB exchange rate increasing, the high saving rate, loose global monetary condition are the causes of the excess liquidity form the angle of macro-economy. Commercial banks coming into the market, lopsided distribution n of the commercial bank's fund are the causes of excess liquidity form the angle of micro-economy. High saving rate and unbalance of payments are going to be the circumstance of the solutions. Monetary policy is going to be the main means in short term. It is also very important to reform our interest rate shaping system and market system.