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.

Research on the Influence of Interest Rate Liberalization on Commercial Banks’ Profitability in China

In order to explore the influence of interest rate liberalization on profitability, an empirical analysis is carried out with the panel data of commercial banks in China from 2009 to 2019. Then, the heterogeneity of the impact is studied among different banks. The results show that, first, interest rate liberalization and commercial banks’ profitability have an inverted U-shaped relationship, whereby interest rate liberalization would increase the profitability of banks in the early stage but would reduce the profitability after reaching a peak inflection point at the later stage. Secondly, the impact varies among different banks, being more significant in urban commercial banks and large state-owned banks.

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.

Study on the Influence Factors of Interest Rate Liberalization on Net Interest Margin of Chinese Commercial Banks

Interest margin income is the main business and profit source of commercial banks. With the promotion of interest rate liberalization, net interest margin can measure the operation and management level of a bank to some extent. Interest rate liberalization has a great impact on the development of China’s commercial banks. In order to study and deal with this situation, this paper analyzes the opportunities and challenges brought by interest rate liberalization to china’s commercial banks, and puts forward relevant suggestions for china’s commercial banks on how to effectively utilize the development opportunities and actively deal with the challenges.

Interest Rate Liberalization and Capital Misallocations

We study the consequences of interest rate liberalization in a two-sector general equilibrium model of China. The model captures a key feature of China’s distorted financial system: state-owned enterprises (SOEs) have greater incentive to expand production and easier access to credit than private firms. In this second-best environment, interest rate liberalization can improve capital allocations within each sector but can also exacerbate misallocations across sectors. Under calibrated parameters, the liberalization policy can reduce aggregate productivity and welfare unless other policy reforms are also implemented to alleviate SOEs’ distorted incentives or improve private firms’ credit access. (JEL E43, E44, G32, L32, P24, P31, P34)

Impacts of monetary instruments on overnight spread under the interest rate corridor framework: evidence from China

PurposeTo verify the effectiveness of the monetary policy, the impacts of monetary instruments on overnight spread under the interest rate corridor (IRC) are examined. The People's Bank of China (PBC) has operated the IRC since 2014. To understand the impacts of monetary instruments on overnight spread before and after the IRC framework, the complete samples are divided into two periods.Design/methodology/approachTo model the overnight spread, an exponential GARCH (EGARCH) approach is used which can examine the interbank market interest rates for monetary policy purposes. The overnight money market plays an important role in the implementation of monetary policy.FindingsChinese interest rate liberalization and the implementation of IRC affect the overnight spread in the short-term financing market. Before the implementation of the IRC, the key factor to affect the overnight spread is mainly affected by the PBC's monetary policy control on the liquidity supply side. After the implementation of IRC, the overnight spread can be the largest part explained by the liquidity demand side and the PBC's multiple monetary instruments have significant impacts on the reduction of overnight spread.Originality/valueThe overnight spread has recently been influenced by various factors that are directly or closely related to the monetary policy instruments and the interest rate policy of the PBC. Chinese interest rate liberalization and the implementation of interest rate corridor policy affect the overnight spread in the short-term financing market.