Research On Causes And Management Strategies Of Liquidity Risk Of Small And Medium-sized Commercial Banks In China

Small and medium-sized commercial bank industry is an important part ofbanking system in China. It has made great contribution to the stable andsustained development of China’s economy. Small and medium-sizedcommercial banks’ social function is to collect the idle funds and then loans tothose who need funds, in order to achieve the transfer of social mobility andobtain their own profit. It is a high-debt business, which requires a good controlof all kinds of risks. For small and medium-sized commercial banks,risk-control is a primary objective, followed by profitability. They usually facerisks including credit risk, interest rate risk, operational risk and liquidity risk.Liquidity risk is the most special one, because other risks are mostly convertedinto liquidity risk and ultimately explode. Good control of liquidity risk can makesmall and medium-sized commercial banks in all cases be able to operatemore robust. In a word, liquidity risk management is a permanent work forsmall and medium-sized commercial banks.This paper mainly studies causes and management strategies of liquidityrisk of small and medium-sized commercial banks in China. In the paper, bysavings-loan ratio and the liquidity gaps these two indicators, it measures theliquidity conditions of China’s small and medium-sized commercial banks,finding that there is significant potential liquidity risk and the status quo is notoptimistic. Therefore, from the aspect of small and medium-sized commercialbanks’ own micro-level, the article establish a panel data model to empiricalanalyze the facts which impact the liquidity risk, basing on the sample data.And gets the conclusion that the causes impact liquidity risk of small andmedium-sized commercial banks rank by order are the matching extent ofassets and liabilities, the liquidity of the assets and liabilities, and profitability.Then, the paper points out that the fundamental reason for the existing ofliquidity risk is the conflict between small and medium-sized commercial banks’liquidity and their profitability. Liquidity risk management can not just stay inliquidity management, banks as enterprises have to take into account theirprofitability goals.Therefore, the text considers controlling of the causes of liquidity risk as main objectives, together with profitability target, next, classifiesthese five objectives to establish a multi-objective programming model of smalland medium-sized commercial banks, and then analyzes the model efficientsolution to obtain the concrete strategies for small and medium-sizedcommercial banks to optimize their operation effect. At the end, this article hasalso made specific policy recommendations.