The Research On Formation Mechanism And Management Of Exchange Rate Risks Of China's Commercial Banks

From 1994, our country established the exchange rate system, which is managed floating exchange rate system on the basis of market's supply and demand, focusing dollars actually. Therefore, China's commercial banks didn't attach importance to the fact that exchange rate fluctuation may be related to likelihood risks. From July 21, 2005, our country has begun to implement a new exchange rate system, which is managed floating exchange rate system on the basis of market's supply and demand, according to a basket of currencies to adjust. It has become a challenging issue when RMB exchange rate formation mechanism reform has taken place. Exchange rate risk exposure of commercial banks and how to guard against exchange rate risk has become new difficulties China's commercial banks concerned. Given the background, it is a positive, constructive idea to investigate exchange rate risk exposure, exchange rate risk measurement and management of China's commercial banks. The investigation will play an important role in controlling and managing exchange rate risk to China's commercial banks.First, it reviews the general theories of exchange rate risk management of commercial banks, including exchange rate risk definitions, classifications, the causes outlined, the exchange rate risk measurement, exchange rate risk management. Second, it elaborate on unique formation mechanism of the exchange rate risk of China's commercial banks. It is illuminated from two angles including internal factors and external factors which result in exchange rate risk of China's commercial banks. In the following chapter, it is empiricalanalysis of exchange rate risks of China's commercial banks. It is majoring in analyzing the exchange rate risk exposure of China's commercial banks, resulted from the RMB exchange rate adjustment. On the basis of analyzing from theory and empirical aspects, it outlines how to guard against exchange rate risks of China's commercial banks, mainly from the exposure of the exchange rate risk management and the management of exchange rate fluctuations. In the last chapter of this paper, it raises some policy recommendations of the exchange rate risk management of China's commercial banks on the basis of the analysis of the previous chapters. It is illuminated primarily from China's commercial banks how to deal with RMB exchange rate adjustment risk in the short-term and how to establish a suitable exchange rate risk management system in the long-term.