Research The Loan Pricing Of Commercial Banks Under The Interest Rate Liberalization

On July20,2013the State Council approved that the People’s Bank of Chinabegan to fully liberalize the controls of lending rate of financial institutions. Withpreparations for the establishment of a deposit insurance system, the liberalization of thecontrol of deposit rate of the financial institutions can be expected soon. The promotionfor the interest rate liberalization will inevitably lead to the appearance of deposit andlending rate narrow of commercial banks and the loan is one of the important businessesand the commercial banks’ main source of profit. So the important challenges ofcommercial banks are how to choose the right credit objects and to price the loan itemsreasonably under the context of the interest rate liberalization.Because of long-term implementation of strict control over interest rates, mostcommercial banks lack loan pricing practices and related data accumulation.Management foundation of loan pricing, which is relatively weak and overdue, mainlydepends on the central bank’s benchmark interest rate. In recent years, on the basis ofwestern pricing theory, domestic commercial banks have made a lot of meaningfulexploration. However, due to the lack of technical support, loan-pricing is still relativelyrough. Risk and cost coverage, the combination of competition and efficiency and thedifferential pricing strategy haven’t been totally taken into consideration. In order toreflect capital cost, risks and administrative cost, how to choose the benchmark interestrate, proper pricing model and the exact loan price has become an important problemfor commercial banks.Combining theory with practice, this paper firstly analyzed the influence of interestrate marketing on China’s commercial banks. Then, we summed up the maincharacteristics of several important pricing models and their applications in our country.Finally, on the basis of relative cost and risk-management level of commercial banks,through empirical analysis we came up with the RAROC model according to ourcountry’s situation. Meanwhile, we did empirical analysis with economic capitaloccupancy costs, overall customer contribution and the risk compensation factors. Inconclusion, we give proper suggestions of loan pricing policy to our government.