Exchange Rate System Reform On China's Commercial Banks And Response Measures

On 21st July, 2005, our country started to practice controlling and administrative floating exchange rate system referencing basket of currencies on the base of supply and demand of market. Then, People's Bank of China and State Administration of Foreign Exchange carried out a series of policy and measures to improve the exchange rate forming mechanism and Increase the momentum of capital flow.Starting of foreign system reform has a profound effect on domestic commercial banks. For long-term stable exchange rate of RMB, the commercial banks not only lack a full understanding of exchange rate risk but also lack the essential experience and skill to manage the exchange rate risk. Exchange rate system reform makes domestic commercial banks face the austere test of exchange rate risk. Adapting exchange rate of RMB reform and facing the exchange rate risk are the subjects that the domestic commercial banks must face. This paper discusses the influence to domestic commercial banks systematically caused by exchange rate reform and wants to do help domestic commercial banks enhance the ability on how to manage exchange rate risk. On the basis of studying relative theory and the concrete practice of exchange rate system, this paper adopts the research method that empirical study is combined with standard study and qualitative analysis is combined with quantitative analysis. Firstly, the paper discusses the direct influence to domestic commercial banks since the increase in value of RMB after the exchange rate reform in six aspects of commercial banks foreign exchange fluidity, accounting reports, rate of capital sufficiency, credit quality, international settlement, introducing strategy investment and overseas combination. Secondly, the paper discusses the profound effect on the domestic commercial banks caused by exchange rate reform, increasing exchange rate risk, credit risk and intermediate business risk of domestic commercial banks are important ones. Thirdly, on the basis of reference to the experience of international bank and the detail practice of domestic commercial banks, the paper tables the detail proposal such as collocating RMB and foreign currency assets properly, developing RMB exchange rate derivative...