Commercial Banks In The Market Process Of Interest Rate Risk Management

In 1970's, with impact of the collation of Bretton Woods System and the Petroleum Crisis, the Federal Reserve of the United States allowed the market supply and demand forces to decide the interest rate. Thus many of the developed countries adopt this kind of policy that the market decides the interest rate level and the central bank carries on indirect regulative intervention to the interest rate. The free interest rate intensifies more risks incurred to commercial banks, which arise because of the change of the interest rate or the yield curve that influence to the financial tools or the future income of banks. This type of risk brought by change of the interest rate factor is called the interest rate risk. The change of interest rate, not only has the latent influence to the net interest income and the net assets value of financial institutions, but also possibly causes the abnormal phenomenon, the run on a bank which leads to the extra fluid risk. Therefore, the interest rate risk management has already become an essential part of risk management process.The financial system reform of China oriented to the interest rate marketability direction advances with steady steps at present. The interest rate is leasing from the original strict control to finally the market decision, and the financial market is also in the process of transformation from lack of the competition, to the intense competition, finally to perfect competition. The major business of commercial banks of China is related to the loan service. With the change of interest rate, commercial banks of our country are prominently faced with the interest rate risk question. However, on the one hand, commercial banks of China lack common sense of interest rate risk.