Research On The Interest Rate Risk Management Of Commercial Banks In China

In October 2015,the full liberalization of deposit interest rates marked the completion of the process of interest rate marketization in China.While optimizing the allocation of financial resources and facilitating enterprise financing,interest rate marketization increased the frequency and magnitude of interest rate fluctuation.This put forward higher requirements of interest rate risk management level of commercial banks.However,China's commercial banks mainly focus on credit risk and liquidity risk due to the long-term interest rate control,and the management of interest rate risk has great shortcomings both in management philosophy and in risk identification,measurement and management technology.Therefore,learning advanced interest rate risk management technology from Western developed countries according to China's actual situation has important practical significance.By analyzing the present situation of interest rate risk and management of commercial banks in China,this paper finds that China is facing more serious interest rate risk such as re-pricing risk and benchmark risk.However,China's interest rate risk management methods of commercial banks remain in the initial stage of interest rate sensitivity gap model.Then,the paper introduces the duration gap model and analyzes its advantages and disadvantages,In addition,this paper modified the duration gap model by F-W duration gap and convexity to make it more accurate in the measurement of interest rate risk.Moreover,on the basis of introducing the VAR model briefly,the paper draws out that duration gap model has obvious comparative advantages in current interest rate risk management of China's commercial banks by comparing three mainstream models of interest rate risk management include interest rate sensitivity gap model,duration gap model and VAR model.In the empirical analysis,this paper analyzes the data of China Construction Bank,CITIC Bank and Bank of Nanjing by using the F-W duration gap model and the convexity gap model.Through the calculation we confirmed all three banks have a positive gap,when the interest rate level increased by 1%,they are faced with a huge loss of net assets.The net asset loss of the three banks is smaller when considering the convexity gap which was closer to the real loss.The empirical analysis proves that the F-W duration gap model is not only theoretically useful but also operable in the interest rate risk management of commercial banks in China.Then,the paper analyzes the problems existing in the management of interest rate risk by the duration and convexity gap models of commercial banks in China.According to the above problems and the inspiration in the process of research of theoretical and empirical,this paper puts forward feasible suggestions to improve the interest rate risk management system of commercial banks in our country around the use of duration gap model and convexity model.In short,this paper combines the duration gap and the convexity gap models for the interest rate risk management of commercial banks based on the previous achievements,this improves the measurement accuracy.In addition,according to problems existing in the management of interest rate risk by the duration and convexity gap models of commercial banks in China and the implications of theoretical and empirical analysis,this paper puts forward feasible suggestions to improve the interest rate risk management system which has practical significance to the interest rate risk management of China's commercial banks.