The Impact Of Deposit Interest Rate Liberalization On The Risk Taking Of Commercial Banks

Interest rate is the price of financial market, the mainstream economists in our country have called for liberalization of interest rate and market-determined rates to adapt to China's market-oriented economic system for a long time. The interest rate marketization reform began in 1993 and ended on October 24,2015 when the central bank liberalized deposit interest rate controls, so we have ushered in a new era. Interest rate liberalization has saving effect, investment effect and financial deepening effect, which can promote economic growth, but the deposit interest rate liberalization will compress the interest spreads of deposit and loan of commercial bank and increase banking market competition at the same time. Within this context, the credit risk, market risk and operational risk of commercial bank will be changed, then the level of bank's risk-taking also changes, which will affect the stability of commercial bank and even the financial system. Accordingly, it has practical significance to analyze how deposit interest rate liberalization influence the risk-taking of commercial banks.The main line of this article is research on the impact of interest spreads of deposit and loan and banking market competition's change, which were caused by deposit interest rate liberalization, on the level of commercial banks'risk taking. On the basis of combing the relevant literature, this paper expounds the relationship between the financial repression and deepening theory, financial restriction theory, Porter's competitive strategy and commercial bank's risk-taking. Under the conditions of deposit interest rate liberalization, the interest spreads of deposit and loan are narrowing, the banking market competition is intensifying clearly, the non-performing loan ratio of commercial banks is increasing. In the empirical research, this paper selects 16 listed banks in our country as samples, processes the semi-annual and annual data of the banks and macro-economic, chooses the variable intercept model with individual fixed effects after related tests. Then, this paper divides 16 listed commercial banks into three types:state-owned commercial banks, joint-stock banks, city commercial banks, and makes regression estimation once again. The empirical results shows that deposit interest rate liberalization, interest spreads of deposit and loan's narrowing and market competition's intensifying are important factors in the increasing of banks'non-performing loan ratio when non-performing loan ratio was chosen as the explanatory variable and the impact of joint-stock banks is the biggest. Only deposit interest rate liberalization reduced bank's capital adequacy ratio when capital adequacy ratio was chosen as the explanatory variable, the impact of city commercial banks is greater than the impact of joint-stock banks and state-owned commercial banks. On the basis of the analysis above, this article puts forward policy suggestions for commercial banks on how to deal with the deposit interest rate liberalization and improve their risk-taking situation, these suggestions are mainly from three angles:commercial banks should improve their profitability, improve the ability to manage and control the interest rate and risk, regulators should enhance the effect of regulation.