The Research Of Commercial Bank Interest Rate Risk Management Strategy

In recent years, with the deepening of the market-oriented reform of interest rate, Interest rate risk (IRR) has become the main risk our commercial banks facing after the credit risk. A domestic commercial bank that was affected by internal and external factors in the management practice exposed the certain IRR. How to effectively identify, accurately measure and control the IRR, directly affects the bank to earn in the future. Based on the previous research and related theory, such as series of Basel accord, the theory of the interest rate decision and the theory of the term-structure of interest rate, the aim of this study was to research the domestic commercial bank's IRR management strategy according to the IRR management process.To IRR identify, this study expounded re-evaluation risk, yield curve risk, basis risks and option risk that the bank facing, and employ the two-stage procedure empirical analysis that using the domestic commercial bank's financial data from 2000 to 2010 for the IRR source. The results showed that the change of expected rate have positive impact on the bank's equity, the interest rate sensitivity of bank's equity is affected by bank's specific characteristics, having negatively relate with equity capital ratio and deposits to total assets ratio, and having positively relate with bank size,loans to total assets ratio and noninterest income ratio.To IRR measure, combined with the domestic commercial bank's condition, this study selected GARCH model to measure the this bank's VaR. This paper used the net interest income scene simulation method to select interest rate of bonds repurchase market as empirical sample data that have more impact on the bank's net interest income. Through the GARCH model's building, we find the GARCH based on the distribution of GED is best fitting for the bank, so we choose GARCH model to calculate the daily dynamic VaR. Furthermore, this model can also through failure rate examine, we can draw the conclusion that GARCH model could be well used in a commercial bank VaR measurement.To IRR control, based on the experience on IRR management mechanism,measurement methods and control means of foreign developed countries, this study proposed the domestic commercial bank should use the dynamic management strategy, and suggested the bank that building effective IRR management mechanism,strengthening measurement of IRR dynamic VaR,closely monitoring the IRR of bond investment and taking diversity IRR control methods.Through the series of research of the IRR of a domestic commercial bank and some relatively propose putting forward, this study have important meaning for strengthening the level of the IRR management.