The Research On Liquidity Risk Of Commercial Banks Based On Stress Testing

How to maintain good liquidity when pursuing profitability has been the focal point of the management of commercial banks. With the reform of interest rate and exchange rate, it's very necessary for domestic commercial banks to improve their liquidity risk management level. In these years, commercial banks have been trying to make use of all kinds of models and methods to measure liquidity risk. But there is no method which has been widely accepted. In terms of stress testing of liquidity risk, most methods simply calculate how changes of factors influence balance sheet. Those methods all lack persuasive model to support. This paper is to analyze how to calculate liquidity risk of commercial banks and how to conduct stress testing on that base.This paper divides banks into three samples: wholly state-owned banks, joint-equity commercial banks and city banks. It takes cash reserve ratio (CRR) as the standard to calculate the liquidity. By constructing Error Correction Model of multiple regressions, it examines those factors which have influence on cash reserve ratio. The outcome suggests that CRR changes in the same direction of SHIBOR and in the opposite direction of loan-deposit ratio(L/D) and deposit-reserve ratio(DRR). In the short run, small banks are more sensitive to SHIBOR and DRR. But in the long run, small banks appear to be more sensitive to loan-deposit ratio and not sensitive to DRR. Then this paper makes a stress testing based on the multiple regressions model. It shows that there is a potential liquidity risk in both kinds of banks. And small banks are facing more serious liquidity situation than medium-sized banks.Based on the results, this paper presents some advices on improving the management level of liquidity risk.