Analysis Of The Influence Of Interest Rate Marketization On Commercial Banks In China

The process of market-oriented interest rate reform has made significant progress, the financial sectors are becoming more and more international. Interest rate system gradually transition from control to liberalization. Interest rate marketization helps to improve the effect of macroeconomic regulation and control, at the same time, it is also one of the core content of financial reform. According to the historical experience of interest rate marketization, this reform will be a long and tortuous process, for developing countries, because of its weak economic foundation and weak ability to resist shock, market-oriented interest rate reform will be more risky, especially for the commercial Banks. For commercial Banks, the positive of the interest rate marketization is to promote the development of financial market and the fair competition between financial institutions, and to create a good external environment for the banking industry rapid development and diversification management, especially the interest rates of commercial Banks can be determined according to the specific market demand and operating costs. The autonomy of competition and innovation will be promoted, personal development space is expanding. In the short term, the marketization of interest rate will change the habit that the commercial Banks have already accustomed to the the interest rate decision mechanism of the external environment and internal management of commercial bank management mode,and produced profound influence and impact. We should pay full attention on it.This article will link the historical experience of the international interest rate marketization, combines with China’s conditions, analyzes the influence of interest rate marketization. First of all, the marketization of interest rate will change competition and mechanism of the banking. Before the marketization of interest rate, the interest rates of commercial Banks generally strictly regulated by the central bank, commercial bank itself is neither necessary nor allowed funds for its product pricing. In the situation, the competition among commercial Banks is similar, the non-price competition become the main means of competition. After interest rate marketization, commercial Banks can price independently according to different product features, cost of capital, competition strategy, customer value, risk degree and the target profit. The way to Compete changes from non-price competition to price competition. Commercial Banks’competitive advantage is whether it has the ability of scientific and reasonable pricing. Second, the interest rate marketization will make financial markets more open, and strengthen flexibility of cash flowing. According to the experience of the foreign country, when the interest rate marketization finished, the amplitude and frequency of the interest rate volatility will increase, and the structure of interest rate term will be complicated. It is also a big challenge for the management and risk-control ability of commercial Banks. For the long time being under the external environment of the controlled interest rate, our financial institutions have formed a set corresponds to the controlled interest rate, operation and management mode. Interest rate marketization is helpful to promote the optimized allocation of capital resources, and to improve the autonomy of financial institutions’management, what’s more, the management risk of the financial institutions will be further intensified. After the interest rate marketization, as the assets and liabilities do not match, the risk of interest rate gap will increase. While the tools avoiding interest rate risk is very poor, the risks of financial institutions will expand. In addition, at the beginning of the market-oriented interest rate reform, the shift of interest rate pricing system will take periodic risk to the financial institutions, especially for commercial Banks, such as market risk, adverse selection risk, interest rate marketization will exacerbate competition among banks, as well as between Banks and other financial institutions.The influence of interest rate marketization will eventually lead to reconstruction and business segment of competition market. Interest rate liberalization breaks the traditional way of competition, and makes Interest rates changes according to the risk and return. Social credit funds will be based on different earnings and risk appetite, flows in financial institutions and regional market. This will leads competition of commercial bank to expand to a wider scope and deeper level. Broad and deep financial competition makes the commercial bank more independent, and at the same time, it also makes a distinction among banks of different types and competitive advantage. Specific perspective, the big four state-owned commercial Banks can obtain funds at a lower cost, with its scale and high credit rating. As the lack of network advantages and credit rating, small and medium-sized commercial banks can only get high quality customers with higher cost and risk. Therefore, developing intermediary business, and improving the quality of financial services will be the key for the small and medium-sized banks to survive in the market competition.