The Application Study Of Stress Testing In Liquidity Risk Management Of Commercial Bank

The liquidity risk of commercial banks is comprehensive risk. A lot of basal risk (such asmarket risk, credit risk, operation risk both by transmitting in monetary market or financial market)of commercial bank will lead to liquidity risk. The liquidity risk usually makes the bank systemunstable easily, what’s serious, it will generate economic crisis of country. In2008, the outbreak ofsubprime crisis at the United States, the topic on taking precautions against and reduce liquidity riskis focused by departments of financial regulation. Stressing Testing, as a new liquidity riskmanagement method, help commercial banks forecast the capability of adapting themselves to theworst condition, and prevent liquidity risk from happening effectively.This article introduces traditional methods and technique of liquidity risk and point out theavailability, advantage and disadvantage of each method. Besides, four development stages ofliquidity risk managements are also illustrated in this article. The important point and innovation ofthis article is the combination of stress testing and liquidity risk management.The current situationand method of domestic and overseas are introduced respectively. The advanced overseasmanagement experience is followed by our commercial banks. In the application fields of stresstesting, Mainland four big commercial banks is sample, loan-to-deposit ratio is as liquidity riskindicator. By constructing Correction Model of multiple regressions, it examines law depositreserve ratio, financing cost, asset structure which have influence on loan-to-deposit.Because stress testing develops more late in China, when commercial banks conduct stresstesting, there are more restricted factors, which are analyzed in detail. At last, this paper gives somecountermeasures to improve stress testing of liquidity risk. First, build our stress testing system;Second, promote the liquidity stress testing; Third, improve resource input; fourth, perfectregulations on stress testing and so on.