The Impact Of Interest Rate Marketization On Rural Credit Cooperatives Operation And The Research On Strategies

Deposit rates regulations have been fully liberalized in China nowadays, which marked the banking industry broke away with "sit-and-get-money" situation. The comprehensive strength of banking industry, such as business structure and management model started to experience a new round of test. Rural Credit Cooperatives take the spread between the deposit rate and the lending rate as the main source of earnings, while other businesses have not been applied and popularized. They also lack the ability of judging the economic situation and predicting the market risk, so the degree of interest rate marketization is relatively low at the operational level and interest rate did not play its true role.Interest rate marketization will greatly affect the management and operation of Rural Credit Cooperatives. It will be important issues to be explored by all the employees at Rural Credit Cooperatives to know how to recognize the financial risk and eliminate the negative influences brought by interest rate marketization, and how to prevent and control risks, seize opportunities in the increasingly fierce competition of markets. This paper has drawn the conclusions by comparing Rural Credit Cooperatives with other Credit Cooperatives and considering the developing condition of interest rate marketization home and abroad. Conclusions can be seen as follows:Firstly, the Rural Credit Cooperatives have been restricted by many factors including lacking of ability to resist risks, relatively backward regional economy, low personnel quality, weak market competition, hysteretic information, and strict supervision. They rely mostly on traditional deposit and lending business and use capital in a single channel. Their ability of managing risks and accessing to information is insufficient. Their working capital awareness, technical ability and interest rate pricing ability are low. But since the rural credit cooperatives have deepened the reform, the changes are considerable. The brunches changed the past situation and innovated their office environment. The rural credit cooperatives are becoming decisive community banks, retail banks and farmers bank, which enhancing their market competitiveness. Secondly, compared with the large commercial banks, rural credit cooperatives have more advantages in terms of popularity, geography and short decision-making chain. The rural credit cooperatives need to make adequate measures to ensure long-term stable development in face of the current situation that competitions and opportunities brought by interest rate marketization reform. At the same time, this paper analyzes the impacts of interest rate marketization on the level of rural credit cooperatives' operation. It will inevitably bring many problems, for example, the industry concentration degree will be greatly strengthened, the interest spreads between deposit and loan will be narrowed down, and asset quality will decrease with the fluctuations in interest rates. Many kinds of weaknesses formed throughout the history of rural credit cooperatives cannot be eliminated in a short period of time, which may lead to the aggravation of different levels of risk and even to the non-operating profit or negative operating profits. This paper specifically analyzes the transformation and strategy in the future operation by focusing on the disadvantages and shortcomings in operation. The rural credit cooperatives must constantly adjust capital structure, innovate financial products, expand the operating liberty, seek win-win cooperation mode with other banks, and change the single and extensive traditional management mode. They also need to improve their risk management level and the quantitative analysis ability, constantly expand investment channels, develop the intermediary business, improve the proportion of non interest income, and working out perfect product pricing mechanism. They have to change their original operation style and form new personnel cultivation mode by "going out" and "introducing". Only by fulfilling all these items mentioned above can the rural credit cooperatives stand the challenge in the interest rate marketization reform. And rural credit cooperatives are on their way to making good use of the interest rate marketization, this "double-edged sword", to better use of surplus capital in the premise of ensuring capital safety, to accurately grasp the market fluctuations to create profits, and to improve the level of comprehensive income.