The Research On Business Transformation Of China’s City Commercial Bank Under The Background Of Interest Rate Marketization

Interest rate marketization is the inevitable request of financial liberalizationand also the core target of financial reform in our country. We have gradually been toreform the interest rate systerm to be more liberal from cancelling the control of theinterbank rate since1996.In recent years, the central bank has released the bank loaninterest rate floating lower limits step by step, but the deposit interest rate control stillexists. As the development of financial integration and globalization,we shouldconstantly improve the level of marketization of interest rate. However, mostcommercial banks still rely on interest rates to earn interest income which willinfluence the development of commercial banks. Under the background of accelerateinterest rate marketization, various types of commercial banks spreads narrowedwhich will decrease the net interest income. In order to deal with the fierce marketcompetition and improve the competitiveness and profitability, commercial banksbegan to explore the new mode of development. It is more challenge for citycommercial banks because of their late start, small-scale, not perfect internalgovernance structures and small market share. With the constant improvement ofChina’s financial environment, city commercial banks have been developed rapidly,and the asset scales expand fast, capital adequacy ratio and non-performing loan ratiolevel continuously toward to a better direction, but the uncertainty of interest rate riskincreases the difficulty of city commercial banks to deal with the risk and thenarrowed net interest margin reduced city commercial banks’ profitability. Moreover,large state-owned commercial banks and joint-stock commercial banks also formed ahuge challenge to city commercial banks’ development. How should city commercialbanks deal with the risks which they faced with? How should they follow the changeof financial environment? How should they transform their development models toimprove their own competitiveness? They are the problems this paper will study.This article first has carried on the elaboration on the theories of interest ratemarketization and points out the necessity of marketization of interest rate, and thenanalyzes the current situations of city commercial banks of China according to theprocess of interest rate marketization in China and points out the deficiencies of citycommercial banks. According to the actual data, we have analyzed the changes of citycommercial banks. Through the analysis of Beijing city commercial bank case, we have pointed out the problems of city commercial banks and the direction they will go.This suggests that city commercial banks should continue to innovative business toimprove their profitability. At last, according to the present situation of citycommercial banks and the analysis of Beijing commercial bank case, we haveprovided some suggestions which include reducing interest rate risk, increasingnon-interest income and strengthening the innovation of financial products.