Analysis On Interest Rate Risk Of China Commercial Banks

People's Bank of China decided to cancel 0.7 times floor of lending rates of financial institutions since July 20, 2013. And give financial institutions autonomy to determine the interest rates of loans according to commercial principles. Since then, the interest rate liberalization reform in China has made important progress, money market and bond market interest rates and almost all domestic foreign currency deposit and loan interest rate has been liberalized. Opportunity of Further promotion of interest rate liberalization reform comes. However, looking at the experience from abroad, after interest rate liberalization, it mostly appears higher interest rates and interest rate volatility. Interest rate fluctuations caused asset prices fluctuation and volatile market, increasing the market risk faced by market participants. For this kind of financial institutions, banks, changes in interest rates means that changes in the value of assets and liabilities, also means that the net interest income changes, thus bring the interest rate risk. It will become the most important market risk banks are exposed to.The paper introduces the concept of interest rate risk and traditional practices of interest rate risk management. And use one of above methods interest rate sensitivity gap method to compare and analyze the interest rate risk management of domestic commercial banks in recent years. Then draw lessons from the research ideas in academic circles abroad, an empirical study on the relationship between China's commercial bank stock returns and changes in interest rate is conducted from the new angle. The empirical results show that the interest rate movements although cannot explain the bank stock returns, they will affect the stock returns volatility. These results have important implications for policy makers and regulators, bank managers and investors.