The Research On The Exchange Rate Exposure Of Chinese Listed Commercial Banks

Since the exchange rate system implemented in 1994, the RMB exchange rate basically pegged to U.S. dollar, which made commercial banks negligent of the exchange rate exposure for a long time. From July 21st, 2005, based on market supply and demand, and referred to a basket of currency, China began to carry on floating exchange rate system with regulating and controlling. So the reform of exchange rate put forward high requirements for China commercial banks in the aspects of exchange rate risk management.In this paper, we examine the foreign exchange exposure of Chinese listed commercial banks. Exchange rate fluctuations affect the overall performance of banks through foreign currency transactions and operations. Using the daily data from 8 Chinese listed commercial banks, this paper offers an empirical look at the relationship between exchange rate, interest rate and the stock price of the listed commercial banks by Error Correction Model. Moreover, this paper studies all sort of impacts of this exchange rate system reform on commercial banks in the long run and in the short run, especially the impacts of the transaction exposure, economic exposure and accounting exposure.