Study On Interest Rate Risk Of Commercial Banks Under The Background Of Interest Rate Liberalization

On October 24 2015,the People's Bank of China announced that it would further reduce the benchmark interest rate of RMB deposits and loans for financial institutions,and at the same time lift the upper limit of deposit interest rate of commercial Banks.This is the further deepening of interest rate liberalization reform following the liberalization of loan interest rate in China,and it also means the preliminary completion of interest rate liberalization reform in China.With the basic realization of interest rate liberalization,interest rate risk has gradually become one of the main risks faced by Chinese commercial banks.The correct understanding and effective management of interest rate risk have become the top priority of commercial banks.Firstly,this paper elaborates on the reform process of interest rate liberalization in China,and collects domestic and foreign literatures on interest rate liberalization and interest rate risk,which provides certain theoretical support for the later study on interest rate risk of commercial banks under the background of interest rate liberalization.Secondly,the paper analyzes the impact of interest rate liberalization on commercial banks:as the capital subject,the realization of interest rate liberalization plays a decisive role in their business development.Under the background of interest rate liberalization,the market interest rate changes with the capital supply and demand,its fluctuation range and frequency increase,deposit and loan spreads decrease,and the competition between commercial banks becomes more strong,resulting in interest rate risk becoming one of the main risks faced by commercial banks.Then,this article elaborated the interest rate risk correlation concept and the classification.The Basel committee points out that interest rate risk is the possibility that commercial banks suffer economic losses due to the fluctuation of market interest rate when they carry out asset-liability business.At the technical level,interest rate risk is divided into basic risk,maturity-mismatch risk,yield curve risk and optionality risk.This paper mainly studies the basicrisk in the interest rate risk of commercial banks--the risk that the change of the market benchmark interest rate of deposit and loan will lead to the change of the actual interest rate spread and lead to the fluctuation of the net interest income of commercial banks.The main reason for the basic risk is the different adjustment of the benchmark interest rate of various assets and liabilities.The reason why this paper chooses to study the basic risk is that the fluctuation of net interest income is the main form of interest rate risk of commercial banks.Compared with other interest rate risks(yield curve risk,optionality risk),it is easier to conduct quantitative measurement.Finally,this paper selects the quarterly data of 14 commercial banks(Industrial and Commercial bank of China,China Construction bank,bank of China,China merchants bank,bank of communications,China everbright bank and other commercial banks)from 2011 to 2017,and uses panel data as the fixed effect regression model to conduct an empirical study on the basic risk caused by interest rate fluctuations.The results show that under the background of interest rate liberalization,deposit and loan spreads become smaller,the net interest income of commercial banks declines significantly,and the interest rate risks faced by commercial banks become larger.Therefore,China's commercial banks should accelerate the adjustment of business structure,actively develop intermediary business,and effectively reduce the interest rate risk of commercial banks.In view of the above analysis,the paper finally gives some suggestions on how to reduce the interest rate risk level of commercial banks.