Study On Stress Testing Of China’s Commercial Banks In The Context Of Financial Liberalization

Frequent outbreak of financial crisis shows that in the context of the economic globalization and financial liberalization, the stable development of commercial banks is very important to a country’s economy. After entering WTO, the degree of China’s financial liberalization is on the up trend, which at the same time means that the commercial banks is facing with great financial risks. In the context of financial liberalization, China’s commercial banks should improve the ability of risk management, to ensure the stable development of financial industry in our country.This paper studies on the stress testing of China’s commercial Banks in the context of financial liberalization. This article focus on the following questions:The development of financial liberalization pose new challenge to commercial banks’ ability of risk management. What can we learn from the application of stress testing system in different countries. And what are the disadvantages of the application of stress testing system in China. How to assess the risks of the interest rate or exchange rate by using stress testing. Using some suitable stress testing models for the empirical analysis.Based on the empirical analysis, this paper tries to adjust traditional stress testing models to make the result more accurate.In this paper, we get some conclusions:Under the background of financial liberalization, stress testing of banks’ risk management becomes a very good supplementary method.China’s implementation of stress testing has some problems:the coverage of the stress testing is not widely; the stress testing focuses on the credit risk and pays less attention to the other risks; the scenarios of China’s stress testing are under the influence of subjective factors; the process of the stress testing is not transparent.The stress testing models for interest rate risk are mainly to measure the difference between interest rate sensitive assets and interest rate sensitive liabilities. There are three types:the repricing model, the maturity model and the duration model. The stress testing model for exchange rate risk is exchange rate sensitivity model. Based on the empirical analysis of stress testing for interest rate risk, this paper puts forward adjusted maturity model.Through the stress testing of repricing model, Bank of Communications can withstand the impact caused by a high fluctuation of interest rate. But through the stress testing of maturity model, Bank of Communications cann’t withstand the impact caused by a high fluctuation of interest rate. The result tells us that in Bank of Communications, the maturity of assets should be very different from the maturity of liabilities, which lead to great exposure of interest rate risk.Through the stress testing for exchange rate risk, Bank of China can withstand the impact caused by a high fluctuation of exchange rate, which shows that Bank of China has a good ability to work under exchange rate risk.Finally, this paper puts forward suggestions in some aspects such as the data collection and talent cultivation, etc.