Challenges and measures faced by commercial banks under interest rate liberalization

the maturity of interest rate marketization marks the transformation of China's interest rate system from the traditional interest rate model to the new one.As an important participant in the reform of interest rate marketization, commercial banks are faced with many challenges, such as the decline of profit level, the substantial increase of operational risk, the increase of financial market instability, and the increase of liquidity risk.They should actively explore new business and management concepts, adopt measures to improve the prices of financial products and derivatives, introduce risk management and control mechanism, develop bank's intermediate business, and promote the development of bank's intermediate business In order to ensure the healthy and stable development of commercial banks, we should take positive measures such as strengthening the ability of debt management, reasonably dealing with the challenge of interest rate marketization.

THE IMPACT OF INTEREST RATE LIBERALIZATION ON THE OPERATING PERFORMANCE OF THE TOP TEN COMMERCIAL BANKS IN CHINA

How to survive and develop better in the process of interest rate marketization reform has always been the focus and research direction of financial institutions. In this paper, through the evaluation and calculation of interest rate marketization into an index, sorting out the relevant indicators and data in 2009-2018, using regression model to study the impact of interest rate marketization on the performance of China's top commercial banks.

Pricing of Embedded Options in Bank Deposits and Loans Based on Jump-Diffusion Interest Rate Model

The marketization of interest rate is an inevitable requirement for China’s financial reform and joining the WTO to connect with the international financial market. It is also an important link to improve the marketization degree of China’s financial system. The marketization of interest rate in China is gradually advancing according to its preset mode. In the process of interest rate marketization, an unavoidable problem is that while the interest rate marketization gives the commercial banks the autonomy of capital pricing, the fluctuation of interest rate is more and more frequent. However, due to the fluctuation of interest rate, the loan as the main assets of commercial banks will be prepayed by borrowers, and the time deposit as the main liabilities of commercial banks will be withdrawn by depositors in advance; that is, embedded options are implied in asset liability items, which makes it difficult for commercial banks to accurately calculate the actual interest margin of deposits and loans and manage the interest rate risk. Therefore, it is of great significance to identify and price such embedded option value. On the basis of identifying and decomposing the embedded options in deposit and loan of commercial banks, according to the change characteristics of deposit and loan interest rate of Chinese commercial banks, this paper chooses jump-diffusion interest rate model to describe the change of benchmark interest rate of deposit and loan in China and demonstrates the advantages of this model compared with other models. Based on Monte Carlo simulation technology, the embedded options of five-year fixed deposit and ten-year prepayable loan in China are priced. On this basis, it points out that the real interest margin of commercial bank’s deposit and loan should be the nominal interest margin minus the value of deposit and loan’s embedded options. In the process of interest rate risk management, we should pay attention to the existence of embedded options and carry out effective management.

The Impact of Interest Rate Marketization on Commercial Banks

<p>Interest rate marketization means that the interest rate level of financial institutions operating and financing in the money market is determined by market supply and demand. It includes interest rate determination, interest rate transmission, interest rate structure and marketization of interest rate management. At present, there are still many deficiencies and defects in the traditional interest rate management system. The reform of interest rate marketization is the focus of China’s financial system reform. Therefore, we should not only be brave in innovation, but also carefully study and analyze. In the analysis process, this paper focuses on the impact of interest rate marketization on commercial banks, and puts forward some countermeasures.</p>

Interest Rate Marketization, Financing Constraints and R&D Investments: Evidence from China

Under the background of the initial completion of Chinese interest rate marketization process, this paper aims to test the actual impact of interest rate marketization on micro-enterprise research and development (R&D) investments financing. Based on the current situation, we put forward the assumption that Chinese enterprises are generally facing financing constraints in R&D investment. The interest rate marketization, which reduced government intervention in fund pricing, helps alleviate financing constraints, especially for non-state-owned enterprises. This paper focuses on the moderating effect of interest rate marketization on financing constraints and R&D investments. The interest rate marketization index is constructed from three indicators: interest rate determination ways, interest rate fluctuation restrictions, and real interest rate level. We use the Euler-equation investment model to test the financing constraints of R&D investment. Based on panel data of listed firms for 2007–2016, we find that R&D investment faces wide financing constraints, and interest rate marketization alleviates financing constraints. More specifically, financing constraints are more significant for non-state-owned firms than for state-owned enterprises, and the deepening marketization of interest rates can effectively alleviate the financing constraints of non-state-owned enterprises.