Study On Chinese Commercial Bank's Foreign Exchange Risk Management

On July 21^st, 2005, the Central Bank of China declared that RMB exchange rate raised 2% against US Dollar, and the exchange regime referred to a basket of currencies. The reform on exchange rate regime makes a more free environment for the domestic financial system to develop. However, it also raises a more strict requirement for those financial institutions to enhance their defense to risk. The exchange risk management becomes more and more important, especially to those financial institutions, whose foreign assets weight a lot. What China commercial banks have to do at this moment, is to build up a strict exchange risk management system and improve it, then pay more attention to control risk. Based on the recent exchange rate regime reform and the preliminarily opened China exchange market, this article does research on China commercial banks' exchange risk management. It would give us a new access to recognize China commercial banks, and would have a practical direction for those banks to further grow in a healthy way.This article mainly explains the mechanism and models of international banks' exchange risk management, and empirically analyzes the exchange risk in front of China commercial banks, as well as their present exchange risk management condition. It also provides with proposals and suggestions in view of matured experience of international banks about exchange risk management. There are three key problems: How is the application and development of exchange risk management in the world? How large is the exchange risk faced by China commercial banks? How should China commercial banks control and manage those risks? In response, this article studies from four aspects: Chapter 1 Introduction, it posts the background and significance of this study, and the overview of domestic and overseas studies on this issue; Chapter 2 Summary on Commercial Banks' Exchange Risk Management, it gives the definition of exchange risk, analyzes methods of measuring and managing exchange risk, introduce the application and development of exchange risk management in the world; Chapter 3 Evaluation on China Commercial Banks' Exchange Risk, it scales the exchange risk faced by China commercial banks in three sources: foreign exchange open position, foreign exchange credit and foreign exchange derivatives. This chapter also studies the exchange risk situation of five domestic listing commercial banks through empirical analyze; Chapter 4 China Commercial Banks' Exchange Risk Management, this chapter demonstrates the evolution of China's foreign exchange market and its impacts on China's commercial banks. It discusses the present condition of China commercial banks' exchange risk management, explores deficiencies and something inadequate, and provides related advice finally.This article uses empirical analyze on five domestic listing banks, introduces and interprets risk measuring models, and by qualitatively and quantitatively analyzing, it directly and systematically shows exchange risk underlying in China commercial banks...