The Research Of Chinese Commercial Banks’ Liquidity Risk Stress Testing Application Under The New Regulatory Framework

Since the2008financial crisis, global financial institutions have strengthened themanagement of liquidity risk. With the introduction of Basel III, China BankingRegulatory Commission issued guidelines on commercial banks ’ liquidity riskmanagement in October2009. In the context of this new regulation, strengtheningtheir liquidity risk management of commercial banks in China is all the moreimportant. Stress testing as a measurement of commercial bank’s risk, has been widelyused in many countries. This article is intended to study stress testing application ofliquidity risk management of commercial banks of China.According to the asset total whether greater than2trillion, this article dividesdomestic commercial banks into the national large bank and national middle smallbank,makes the liquidity ratio as a dependent variable to measure the size of theliquidity risk, and uses gray correlation analysis to sort factors affect the liquidity ratioin accordance with the size of the impact, and ultimately selects the statutory depositreserve ratio, loan-to-deposit ratio, interbank interest rates, GDP growth, and otherfactors as independent variables to establish pluralistic regression model. This articleanalyses the pressure capability of these two types of commercial bank liquidity riskin a variety of adverse conditions. Finally, this article concludes that these two typesof liquidity risk of commercial banks have higher capacity under pressure, and willface liquidity risk only under serious pressure.According to the results of the stress tests, the article gives the commercialbanks’ liquidity risk management countermeasures from the regulatory andcommercial banks two angles. At the regulatory level, request the management to stepup supervision of four indicators, establish monitoring indicators system; from theperspective of the commercial banks themselves, this article requires commercialbanks to establish internal control systems, internal databases and to developcountermeasures, such as liquidity risk management expertise to build overallliquidity risk management system. Finally, this article focuses on analysis of thecurrent stress test applied in liquidity risk management deficiencies, mainly includeindex selection single, there is no fixed model and measurement standards, thetechnology is immature. In response to these shortcomings, this article makes further suggestions to liquidity risk stress tests. First, establish liquidity risk measurementindex system of constructing a complete from regulatory perspective, static anddynamic angle,; the second is the introduction of VaR models, a pair of grey systemmodels, methods such as Monte Carlo simulation to improve commercial banks ’liquidity risk stress-testing models.