China's Commercial Banks' Lending Interest Rate Market Pricing Research

With the continuous deepening of financial reform, the pace of marketization of interest rates gradually accelerates. The marketization of interest rate will qualify the commercial banks to own self-determination right on loan pricing. Autonomous pricing means that competition among banks will shift from non-price to price. Therefore, formulating a scientific and reasonable price and shifting loan pricing from extensive to the refinement is important for our commercial banks whose revenue mainly come from the margin between deposit and loan rate. It is of the utmost importance for our commercial banks to enhance market competitiveness, prevent credit risks, optimize the allocation of credit resources and improve the profitability.Based on the analysis on the basic theory of loan pricing and the three traditional loan pricing model in western countries, combining the status quo and problems of our commercial banks, from the point of market-orientation, operability and credit market characteristics of our country, this dissertation analyzed the promotion of loan pricing in our country. It proposed a base lending rate model which takes bank-enterprise relations into account. That is, loan interest rate = benchmark interest rate + risk premium + expected rate of return + adjust rate of bank-enterprise relations. The benchmark interest rate in the model is market-oriented interest rates. By doing Granger causality test on Shanghai Inter-bank Offered Rate (Shibor), the inter-bank bond repo rate and central bank issued bills interest rate, Shibor has basically acquired the property of benchmark interest rate. It is expected to become the benchmark interest rate of commercial bank loan pricing. Credit risk premium is the core parameters in the model which has the greatest impact on loan pricing. Adopt the internal ratings-based approach (IRB)which is the core technology of Basel II to measure credit risk. Considering China's specific national conditions, some adjustment to the risk factors of IRB was made, especially the introduction of Z-valued model and qualitative analysis of non-financial factors. So that the evaluation of credit risk is more accurate and loan price can fully cover the risk. By adding adjust rate of bank-enterprise relations in the model, the loan price not only can make up the average cost and risks, but also can achieve differential pricing according to the customer's deposit-loan ratio and settlement amount in the bank. It also helps the bank access more stable earnings.The application and development of loan pricing technology marks the credit management shift from risk control to the pursuit of balance between risk and benefits and maximization of risk-adjusted return on capital. In order to accelerate the construction of China's commercial banks loan pricing system, the thesis proposed some suggestions such as strengthening loan pricing support systems, enhancing the construction of credit rating, building credit information databases, focusing on training specialized personnel and strengthening the exchange of information with foreign countries.