The Challenge Of Market - Oriented Interest Rate And The Response Of Commercial Bank

Since1990s, China’s interest rate liberalization reformhas beencontinuously advancing, which results in a huge challenge to thetraditional revenue model of commercial banks. Thus, it is crucial forbanks to figure out the countermeasures and adjust mode of operation todeal with the challenges of the interest rate liberalization.This paper firstly introduces the theories related to the interest rateliberalization in order to shed light on its essence-an effective wayto promote the free market-oriented interest rate that is formed on thebasis of financial repression. Meanwhile, by comparing and contrastingthe international cases of the interest rate liberalization, such as casesin America, Japan, Chile and other countries, the paper also summarizesmajor reform paths of interest rate liberalization-both the radical andgradual way, and further suggests a reform path for China. Havingclarified the orientation and progress of China’s reform, this paperexplores the operating status of commercial banks in China and analysesthe challenges of commercial banks brought by interest rateliberalization. Finally, the paper proposes effective methods, includingtransforming and upgrading, and structural adjusting, for banks tosuccessfully deal with these challenges.