The Application Study Of Stress Testing In The Liquidity Risk Management Of Commercial Banks

In2007,the huge loss of liquidity result in a large number of subprime mortgagelenders’ bankruptcy in America. Under the leading of risk contagion effects, and therisk became a worldwide financial crisis.In June.2013,with the phasing out ofquantitative easing,capital gradually return to the United States from emergingeconomies.In addition, under the influence of the moderately tight monetary policy ofthe central bank, the interbank lending rate has reached an unprecedented height.China’s banking sector is faced with the situation of the lack of liquidity, which resultin the phenomenon of money shortage. These lively events highlight the importanceof the liquidity risk management. As an indirect risk, liquidity risk is closelyassociated with other risk. Operational risk, strategic risk, price risk, credit risk oftenconvert into liquidity risk in different ways, which make the liquidity risk become acomprehensive risk and the most serious risk for the Joint-stock commercial bank.Therefore, the management of liquidity risk also logically become the most importantcontent in the process of commercial bank management. In all kinds of liquidity riskmanagement, as a kind of effective tool, liquidity stress testing could be used to fullyforecast the possibility of liquidity risk under extreme events happening in the future,they need to take effective means to prevent potential liquidity risk actively andimprove the ability to copy with the risk. Stress testing is widely used abroad,but it isunknown in our country.Stress testing is introduced into our country in recentyears,which is less mature in the theoretical research and practical application. It isnecessary for us to strengthen the research of stress testing.This paper firstly introduces the basic concept of liquidity and liquidity risk. Onthis basis,the paper points out the reasons for the formation of liquidity risk, andintroduces the operational risk, strategic risk,price risk, credit risk how to translateinto the liquidity risk.At the same time,it summarizes the static and dynamicmeasurement of the liquidity risk.Next, it makes a thorough analysis of the basicconcept of stress testing, principles, methods one by one. In the practical application of the stress testing,the paper not only introduces the present situation of our country’scommercial bank stress testing,but also strictly follows the process of the stresstesting and regard the commercial bank as the research object,take the excessdeposit reserve rate index to measure the liquidity risk and take the legal depositreserve rate and loan-to-deposit ratio as key financial variables.Afterwards,theliquidity stress testing is implemented, the empirical results also are analyzed in detail.Finally, According to the problems and defects existing in the process of the stresstesting, this paper puts forward some corresponding suggestions to improve theliquidity stress testing in our banking industry.