China's Interest Rate Market And Commercial Bank Interest Rate Risk Management

At present, Chinese financial innovation is stepping into the most critical stage. The interest rate marketization innovation called "the last barrier" is the most striking and sensitive subject.With interest rate liberalization as a major prerequisite, the article devote a lot to the interest rate risk facing the commercial banks in the process of reforms and how to control and manage it. In terms of the risk duration, the reform brings about two kinds of risks: periodic risk and enduring risk, namely interest rate risk. The interest rate risk is classified into embedded risk, reprcing risk, yield curve risk and basis risk. The main risk facing the commercial banks of china is reprcing risk because the period structure of loan and deposit is very mismatching. In order to manage and control interest rate risk, commercial banks should take advantage of the experience of international banks in advanced risk management methods and techniques in order to supervise and control the interest rate risk. Taking the current circumstances into account, commercial banks in china can not only predict and control interest rate risk in asset-debt sheet by means of gap management, duration management and OAS technique, but also prevent interest rate risk with hedging. At last, the author puts forward concrete strategy of dealing with the interest rate risk. Firstly, commercial banks should innovate organization institution and financial instruments; Secondly, banks must intensify cultivating interest rate risk management personnel promote the ability to predict long-term and short-term interest rate level; Thirdly, commercial banks should set up advanced pricing mechanism of loan and deposit; Fourthly, commercial banks must set up effective interest rate risk prevention mechanism. Only doing this, commercial banks can set up an effective risk prevention and internal-controlling system of interest rate in order to prevent banks from interest rate risk, and lay a solid foundation for comprehensive risk management.