An Empirical Study On Chinese Commercial Banks Liquidity Risk Stress Testing Under The Post-loan Deposit Ratio Background

In June 2015, China officially issued the amendment to the commercial bank law, the traditional stipulation that balance of loans to deposits must be no more than 75% was deleted since then. Farewell to the golden age, Liquidity risk of commercial bank in China stepped into a new era—the post-deposit-loan ratio age. LDR, as the traditional regulatory index, has played its important role in controlling liquidity risk since introduced, especially in limiting bank loan, reining in the overheat of credit and regulating the growth of economic development. However, since the economic crisis, China’s economy has changed with adjustment to world economy. The existence of Shadow Banking and expansion of financial disintermediation has seriously threatened the traditional “too big to fail ” image of commercial banks. LDR gradually cannot adapt to the new development environment, and fade out into the background. In the post-LDR era, commercial banks are no longer restricted to the 75% limitation of loan, and are more autonomous in allocating asset structure. The deletion of LDR has brought new opportunities and challenges and is of great importance for the structural adjustment to China’s banking industry, where the ability of controlling liquidity risk are more highly emphasized. How to avoid liquidity risk in each process of operation? What kind of monitoring indicators can be taken to make up for the shortages of LDR? And how to build a more detailed and comprehensive liquidity risk management system to prevent from new liquidity risks? These are all new questions worthy studying for commercial banks under the new background.This thesis analyses status quo of China’s commercial bank’s liquidity risk based on summarizing of past liquidity risk studies, adding to new factors such as the development of P2 P financial institutions. And then establishes the mathematical model of monitoring and forecasting bank liquidity risk with VEC method and VAR method, and carries out stress test with multi-linear regression. Finally, this paper gives policy suggestions on how to build a more complete and comprehensive, more risk-sensitive and more suitable for post-LDR era banking liquidity risk management system.