Research On The Impact Of Interest Rate Liberalization On The Financial Risk Of Chinese Commercial Banks

With the reforming of the country’s economic and financial system, our country is accelerating to propel the interest rate liberalization. The People’s bank of China announced that there would be no limitation of deposit interest rate ceiling for commercial banks and rural cooperative financial institutions in October 2015. That means the control of interest rate is released and the interest rate liberalization is almost finished in policy. The interest rate liberalization can improve the financial environment and makes it more efficient on operation and source allocation. Then it can lead the financial sector even the whole society to achieve equilibrium. But the experience of international practical also showed that the interest rate liberalization would be a long and tortuous process. It gives more independent pricing power to commercial banks, at the same time hiding huge risks. From the process of many countries, we can find the interest rate liberalization is likely to lead to the financial crisis. Many small banks failed in the United States after the interest rate liberalization. The “bubble economy” after the interest rate liberalization made the Japanese economy into recession for ten years. The long-term interest rate control makes our commercial banks lack of awareness of risk management. Meanwhile, the commercial banks need to have a good way to identify and control the risks to development well after the interest rate liberalization in our country. So, researching on the impact of interest rate market and giving some advices to commercial banks have important realistic meaning and theory value.If the enterprise wants to develop stably and continuously, it must have a safe financial condition. The commercial banks are the same as they are a special kind of enterprise. So, this paper mainly analyzes the impact of interest rate liberalization on commercial banks from the financial risk aspects and hopes to find some ways to improve the management of commercial banks in China. Firstly, this paper briefly describes the history of the liberalization of interest rate of in our country as the research background and states the research content. Secondly, to understand the definition of the interest rate liberalization and related theory, this paper combines the domestic and foreign literature. On the basis of previous studies, this paper puts forward the research direction. Then this paper select the index of the bank financial risk from five aspects, including the capital adequacy, asset quality, profitability level, management level and liquidity level,and select the net interest margin and interest rate fluctuations as a representative of the interest rate liberalization. Then we use factor analysis and Logistic regression analysis to analysis the index and establish the financial risk measurement model of commercial banks. To know the impact of interest rate liberalization on the financial risk of banks, we use the samples of commercial banks to do the empirical study. Finally, according to the results of the research, we put forward the countermeasures and suggestions to strengthen the risk control of commercial banks.According to the study, we find that the financial risk of commercial banks generally increased with the advancing of interest rate liberalization. If the banks still rely on the interest income as the main source of profit, they will be difficult to developing since the narrow on net interest margin will increase bank financial risk. For small banks, besides the narrow on net interest margin, frequent interest rate fluctuations will also increase the financial risk. All this will be impact the healthy and stable development of banks. So, this paper also puts forward the corresponding suggestions in the end. For example, accelerating the perfection of financial policies and regulations; strengthening the supervision function of financial institution; developing intermediate business to improve bank profitability structure; implementing diversification strategy and differential development model and so on. We hope to promote the interest rate liberalization in our country better.