The Impact Of Interest Rate Liberalization On The Profitability Of Commercial Banks

Interest rate liberalization reform refers to the process of transferring the decision of interest rate to the market and letting market subjects take the initiative to decide the interest rate of trading funds.In the 1990 s,the urgent need for the construction of market economy in our country,at the same time the central bank controls the interest rate system can not reflect the market capital supply and demand,leading to capital allocation inefficiency problem,in this context began to promote the reform of interest rate marketization in our country.After that,the reform of interest rate liberalization in China has been steadily and orderly,and the interest rate control has been completely abolished at the end of 2015.The development of interest rate liberalization in China has entered a new stage.In the new development stage,the construction of China's market economy is deepening,and interest rate liberalization has played a positive role in building a more reasonable economic system.Under the condition of interest rate marketization,the interest rate price is determined by the market,which makes the allocation of funds more efficient and gives new impetus to the transformation and development of financial institutions.Meanwhile,market-oriented interest rate reform for a new challenge to the development of the entire financial industry,from the experience of reform,interest rate marketization,the economic crisis,the bank failures of large area,Banks in countries increased risk and so on question.In the face of such warning,our country should take the initiative to cope with the effects of the marketization of interest rate brings to the commercial Banks,and the influence of clear way and extent to provide practical and effective countermeasures for commercial Banks,promote the reform of commercial Banks through time and realize their transformation and upgrading.Based on the existing literature research,this paper further analyzes the interest rate liberalization in China.The first two parts of the paper introduced the background and significance of the research and comprehensively analyzed the previous research results.The third part of this paper analyzes the influence of interest rate liberalization on the profitability of commercial Banks.Interest rate marketization and the commercial bank profitability measure these two concepts,summarizes the theoretical basis for the development of interest rate liberalization,analyzed the influence of commercial bank profitability of macro,meso and micro factors.Next,it points out that the mechanism of interest rate liberalization on commercial Banks is interest rate transmission effect,risk transmission effect and competition transmission mechanism.Finally,the paper analyzes that the interest rate liberalization affects the profitability of commercial Banks through net interest difference,business structure,innovation ability and operating efficiency.In the fourth part of this paper,the changes of the deposit and loan interest rates in China in the last 20 years are analyzed,and the changes of the indicators affecting the profitability of commercial Banks in the last 10 years are also analyzed.Comprehensive analysis of the data,you can see that the basic conform to the theoretical analysis of the previous chapter,after interest rate marketization,commercial bank's net interest margin narrowed,risk situation more complex,got some business structure optimization,innovation ability is also improved.Fifth part of the article in order to verify whether the results of theoretical analysis,select the three different types of commercial Banks for nearly 10 years of panel data regression analysis,the empirical results show that spreads level and coefficient of interest rate marketization of commercial bank profitability is significantly related to the non-performing loan ratio,the GDP growth rate and improve financial transaction scale Internet has significant negative influence on commercial bank profitability,lower cost income ratio to improve the profitability of commercial Banks.In addition,the variable of non-interest income accounted and positively related to profitability relationship but no significant effect,this shows that China's development of non-interest income level is low,weak contribution to improve profitability.At the same time,regression analysis was carried out for different types of commercial Banks to further study whether the influence of interest rate liberalization on different types of commercial Banks was different.Based on the analysis of empirical results,it is proved that the interest rate liberalization influences the profitability of China's commercial Banks from the aspect of parties.At the end of the paper,based on the above analysis,the problems existing in the improvement of commercial Banks' profits are put forward,and positive and effective development Suggestions are given accordingly.Commercial Banks should vigorously develop intermediate businesses and strive to diversify their operations.Improve their risk pricing and risk control ability to achieve stable development;Different types of commercial Banks should adopt different development modes to reflect their own advantages and characteristics.Finally,we should actively innovate and improve the overall operating efficiency.China's economic strength is growing,and interest rate liberalization is deepening.Meanwhile,the development of Internet technology has reached the world's leading level.In such a big background,the development of commercial Banks facing unprecedented pressure and challenges,but if commercial Banks can establish a more scientific structure of profit at the same time,make good use of the Internet technology advantage,realizing the development of the Internet,and relevant policy support,I believe that the development of commercial Banks in the future road will realize own profitability in ascension,building up a more scientific,perfect and efficient banking system.