The Interaction Of Interest Rate Marketization And Bank Concentration

Market-oriented interest rate reform in China has achieved initial success, and has now come to the final mark of the reform, that is fully liberalized deposit and lending rates. According to international experience, the reform of the interest rate marketization is risky. The banking market structure is selected as a starting point to research the impact of interest rate marketizaion on banking industry structure.The first chapter describes the background and significance of the topic. Chapter2summarized the theoretical basis of the interest rate marketization and banking structrue. Chapter3combed the process of marketization of interest rates in bill market, bond market as well as the deposit-loan spreads. The fourth chapter analyzed the impact of bank concentration on spreads. Chapter5is empirical analysis of bank concentration. Chapter6gives the corresponding policy recommendations.The conclusions drawn by this study are as follows:1. China’s banking industry is monopolistic.2. The high degree of monopoly lead to high loan-to-deposit spreads;3. The interest rate marketization will reduce the degree of bank concentration.Some useful policy recommendations:1. The interest rate marketization should be promoted actively.2.The central bank should encourage medium-sized banks to innovation in products and services in response to the monopoly of the large commercial banks.3.The government should accelerate the establishment of financial markets.