Research On Chinese Commercial Banks' Liquidity Stress Testing

It is guarantying the sufficient fluidity that one of most vital duties to any commercial bank, which takes the noticeable function to realize commercial banks' security and profit. The liquidity risk of commercial banks is a comprehensive risk. A lot of basal risks (such as credit risk, market risk, and operation risk) of commercial banks will lead to liquidity risk by transmitting in monetary market or financial market. Especially through the financial crisis initiated by the fluidity lacking in 2008, We deepened the understanding of commercial banks'liquidity management. Recently, our county has also been inescapably affected by the crisis in the process of globalization. Therefore, how to guard against liquidity risk of commercial banks is a subject of special attention for our financial regulatory authority.Following the Basel Capital Accord (â…¡) framework, this paper try to research American stress testing, Euro stress testing, and the suitability to our banking system; Measure the liquidity stress testing of a commercial bank; Improve the measured method of liquidity risk, so as to avoid large-scale extreme scenarios of liquidity risk. The test will help financial regulatory authorities recognize the problems of commercial banks; Enhance the effect of macro-regulation and monetary policy; Supply the operated criterion of risk management. Thus, the stress testing system of liquidity risk enhances the management level of liquidity risk for chinese commercial banks.Empirical studies show that even no direct impact for China's virtual economy, facing with the impact of fluctuations in international markets, financial institutions will fall down under the influence of the impact of the real economy. The main part of the article is to carry out the research on commercial banks' liquidity stress testing in the condition that avoiding from the impact of external factors; Another important part is to research the features and defects of other countries'stress testing systems, and the suitability to our banking system. At the same time, It tries to analysis commercial banks' liquidity gap in the future according different interest rate, exchange rate and deposit reserve rate under extreme conditions with the corresponding credit quality in the impact model. In the market conditions, studies show that large fluctuations, in particular in the fluctuating of deposit reserve ratio, can be enormous on liquidity risk. It shows that our commercial banks need to establish and improve liquidity testing system, and learn the lessons from the U.S. sub-loan crisis.Through studies from emperical practice of foreign and our commercial banks, we draw out the main conclusions of this paper:At first, the operating feature of "long loan short deposit" period is the vital cause of liquidity risk. Second, the impact of external market volatility is caused by the external liquidity risk. For example, many real eatate policies are published, which makes the real eatate prices fluctuate and lead to generate liquidity risk due to not pay commercial banks' loan. Third, in the condition of flutuating on deposit reserve rate, the exchange rate, interest and credit quality in dynamic stress testing, the study shows that deposit reserve rate for commercial banks is the largest impact of the mobility, followed by the impact of interest rate, and exchange rate depends on the impact of foreign exchange business proportion of cases. At the same time, the nonperforming-loan ratio happens with the conditions above. Fourth, empirical studies find that the actual flow test results of the gap with a certain degree of deviation is due to our country's interest rate, exchange rate and other factors, which are decided by our monetary authorities'predict to the future to a large extent. Therefore, the liquidity of commercial banks not only need the precise stress tests, but also need experienced technical staff to assess the subjective standard.