Research On Rate Risk Assessment Of Commercial Banks In China

Since July21,2005,China made the announcement on reforming the RMBexchange rate system.China has moved into float exchange rate system,which isbase on the demand and supply in the market with reference to a basket ofcurrencies.In June19,2008’,Peoples Bank of China announced that thegovernment will further promoted the RMB exchange rate reform，the flexibilityof RMB exchange rate will be further enhanced,which also marked changes inthe RMB exchange rate will further increase the rate of the RMB exchange ratelfuctuations, this trend will become more apparent.Since then the new exchange rate environment has put forward a greaterchallenge and higher requirements on assessment and management of exchangerate risk.Exchange rate reform has made all kinds of foreign assets andcombinations of commercial banks exposed to signiifcant exchange rate risk.Withthe further opening of China’s capital market and the reform of exchange rateregime,if the exchange rate risk can not be effectively managed, micro risks suchas single bank failures and macro risks of financial instability will happen.There is not a long time commercial banks were exposed to exchange raterisk. Commercial banks lack experience of exchange rate risk measurement.For along time, China’s commercial banks mainly used traditional risk measurementwith a strong subjective qualitative analysis to measure exchange raterisk.However,it is not very scientific. Under the current exchange rate regime ofcommercial banks to better measure and manage exchange rate risk，that is the issue of this paper.The thesis can be divided into six parts.The first part is an introduction, this part focuses on the background ofwriting, topics of significance, research status, writing ideas and method.The second part is the literature review, including the domestic andforeign research.The third part describes details of the meanings of exchange rate risk ofcommercial banks, and the form and impact mechanism.To begin with, itdescribes details of the meanings of exchange rate risk of commercial banks andthe type of exchange rate risk.Then it describes exchange rate and exchangerate determination theory, exchange rate system.Finanlly, it describes the formand impact mechanism of exchange rate risk.The fourth part describes the current stituation and shortcomings concerningrate risk assessment of commercial banks in China from recognition，measurement and control. It uses exposure of foreign exchange to measurecommercial rate risk.The fifth part is the exchange rate risk measurement of commercial banks inChina,GARCH-VaR analysis method is based on the daily risk measure whichis a more scientific approach to risk management.The sixth part puts forward conclusion, the control method of exchangerate risk of commercial bank in China and the relevant policy recommendationsare provided.