An Analysis On The Business Risk Of The Chinese Commercial Bank Under Deregulation Of Interest Rate

Interest rate marketization is a very important part of financial system reform in China. Interest rate marketization can improve the efficiency of the use of financial resource, guard against financial risks and stabilize the financial order .At present, China's market-oriented interest rate system has entered a crucial stage . With the full opening up of China's financial industry in 2007, a large number of foreign banks will enter China's financial market . In China, the Bank of China, China Construction Bank and Industrial and Commercial Bank have completed the IPO. With the advance of market-oriented interest rates , the interest rate risk and credit risk of China's commercial banks'will surely be increased gradually .But, at present, the commercial banks'interest rate risk management skill in China is still poor, the banks have not established a complete system of risk analysis and decision-making , and with China's underdeveloped capital markets ,the management tools of banks have been badly constrained. The next stage, China's commercial banks need to learn how to be accustom to the challenges of a market-oriented interest rate system as quickly as possible. and to be stronger in a new environment. This is the key problem that China's commercial banks will have to be faced with .This paper analyzes the necessity for a market-oriented interest rate system in China,and introduces the relevant market-oriented interest rate theories. Through studying the case of market-oriented interest rate in different countries and regions, and analysing market risks of China'commecial banks, the paper offers some suggestions to the process of market-oriented interest rates in China.Meanwhile, in order to test the actual effectiveness of the risk control tools in the risk management of commercial banks , this paper uses Interest Rate Sensitive Gap and Duration to analynize the balance sheet of ICBC at the end of 2006. The results show that :After the completion of interest rate marketization ,the commercial banks will be always threatened by the interest rate risk .and the structure of assets and liabilities of the commercial banks could cause the potential risks in the future. Therefore, the paper offers several suggestions about how to avoid interest rate risk at the end.