Analysis Of China’s Listed Banks’ Adaptability To Interest Rate Liberalization

Interest rate controls limit the freedom of fluctuations in interest rates, resulting in lower overall level of interest rates, the interest rate structure distortions, capital efficiency and low defects, weakened the interest rate adjustment mechanism, interest rate controls has shown a lot of flaws with economic development. Therefore, the trend of interest rate liberalization had already set off in the last century, interest rate liberalization has been achieved in most of developed country.China gradually achieve financial liberalization, and promote market-oriented interest rate reform. China began to liberalize interest rate Since1996, many money market products began to implement market-oriented pricing, in2003, China put forward the goal,the basic principles and general ideas of the interest rate liberalization. In2004the central bank relaxed control of deposit interest rates, and in October of that year liberalized the interest rate cap of loans.The interest rates of China’s banking industry is under control in long-term. China’s banking industry lack of basic means of interest rate pricing. Interest rate liberalization process has changed the competitive environment of China’s banking industry. After the interest rate liberalization, competition among banks will be extended to other areas, which will change banks’situation.This study will focus on the banks’ability to adapt Interest rate liberalization process. Therefore, this article will first summarize developed interest rate reform, then give a basic judgment about china’s Interest rate liberalization combined with China’s actual situation. Then summarize scholars’ comprehensive analysis about the impact of interest rate liberalization to the banking industry. Establish a evaluation system about the bank’s ability to adapt the interest rate liberalization; then, using principal component analysis to analysis annual data banks listed2004-2012; Then, judging the banks’ ability to adapt the interest rate reform from multi-angle of view; Finally, the corresponding policy recommendations based on the analysis results.The innovation of this paper is the following points:First, new research perspective. Most of the article is to study the period after the end of the interest rate market reform. Some literature focus on the competitive of banking industry, but did not combine the interest rate market research. Second, the data are more comprehensive. This article uses the2004and2012annual reports of listed banks as a data source. Data reflect changes in the bank’s ability to adapt to the process of marketization of interest rates. This article covers the majority of the data of China’s listed banks. Third, innovative analysis methods. To compare different categories of banks, bank divided into four state-owned banks, national joint-stock banks and city commercial banks in three categories. Different categories of comparison scores banks. Analysis the different bank’s ability adapt to interest rate liberalization.From the results of the analysis point of view, no matter from the trend of score, or from the average score rankings, the city commercial bank (2) the performance of the optimal, joint-stock commercial Banks in the second (6), large state-controlled Banks (4) ability to adapt the worst. The reasons why city commercial bank performs best is that asset management’s ability and ability to resist risk is the highest, most efficient joint-stock commercial Banks in second place due to the highest profit potential and it’s asset management efficiency is higher. This ranking results reflect the current of listed Banks in our country.Ranking results for China’s listed banks to improve their operating conditions are important, but also a guiding role for improving the ability to adapt to the interest rate market reform.