Research On Liquidity Risk Management Of Commercial Banks

Liquidity is the lifeblood of commercial banks, It is the basis of other activities of the commercial banks, liquidity risk is the main risk that commercial banks need to face.The endanger of liquidity risk is wide. It can directly affect the survival of the commercial banks which is the center of financial system, the hazards of severe liquidity risk of commercial banks will lead to the collapse of the entire financial system.On the one hand, under the planned economy, China’s commercial banks have played the role of the government economic adjustment tool for a long time, resulting in a large number of non-performing assets, and total assets are of a single class. All of this, to some extent,exacerbated the liquidity risk of commercial banks; On the other hand, under the protection of the Government’s lender of last resort China’s commercial banks has failed to give sufficient attention to liquidity risk.Although China’s regulators have been to strengthen the management of commercial banks in recent years, there are still a lot of shortage on the management of liquidity risk.Management of liquidity risk management is still in a preliminary stage.After three times separation of bad assets, liquidity risk indicators of Chinese commercial banks perform well now, but this masks the defects of the commercial banks on the liquidity risk management. financial innovation has appeared widely in the21st century, but it also brought a greater risk. The subprime mortgage crisis of US has shown how bad the international financial environment is in2007. All of this enduce us to study the liquidity risk of commercial banks.This article is divided into five sections to study the commercial banks’ liquidity risk. The first part is an introduction, It introduces the research background, basic methods and the main framework of this article.It also gives a review of the liquidity risk of commercial banks. The second part dissuses the liquidity risk of commercial banks theoretically.In detail, it dissuses the root causes of the liquidity risk, and analyzes the reasons that affect the liquidity risk of commercial banks. On this basis, it puts forward the necessity for liquidity risk management.The third part of the article is a quantitative analysis of the liquidity risk of commercial banks.First of all, we study commercial bank liquidity risk measurement issues,then, we analyze the main factors affecting the commercial bank liquidity risk,using the monthly data of the four state-owned commercial banks from2009to2012. The empirical test results show that consumers price Index and the RMB Exchange rate against the U.S. dollar have a significant effect on the liquidity risk of commercial banks.Then, we study the degree of influence of the consumer price index, and the RMB exchange rate on the liquidity risk by method of risk stress test, the empirical results show that, the change of consumer price index and the exchange rate will be a negative impact on the liquidity gap.If the consumer price index increases by5%, then the liquidity gap will be reduced by18.21%; If RMB exchange rate is increases by5%,then liquidity gap will be reduced19.68%.The fourth part of the article study on liquidity risk of Industrial and Commercial Bank of China. It dissuses the risk management framework and the status quo of Industrial and Commercial Bank of China. And it also Analyzes liquidity risk from the view of balance sheet.The result shows that overall liquidity risk of ICBC is not large and the indicators are in line with the basic requirements of the People’s Bank and the Banking Bureau.Many indicators are even in a leading level.But, there are some hidden dangers on liquidity risk management which should cause attention of the manager.Finnally,on the basis of these studies,the paper gives some suggestions on the management of liquidity risk of commercial banks.