The Marketization Of Interest Rate And The Strategies Of Commercial Banks

Since the 1970s, for the need of strengthening economic development, all countries gradually lose control of financial regulation, in order to promote financial market via financial liberalization. The interest rate, as one of the important means of financial market regulation, is receiving increasing attention and concern, and the marketization of interest rate has gradually become the mainstream trend of financial market development in all countries. The development of financial market in China, in urgent need of financial reforms, is to apply reforming measures to China's economic development. The marketization of interest rate lays great emphasis upon the independence of financial institutions in market economy, which leads to greater profits of financial institutions in market competition, accompanied by greater risks at the same time.For the 14-year development after its official start, the reform of the interest rate's marketization has improved steadily, and achieved its advanced stage. There are 118 types of home & foreign currency interest rate management, whether they are released, merged or abolished, in the People's Bank of China. Currently, the People's Bank has 30 types of home & foreign currency interest rate. The upper limit of lending rate (the rural-urban credit cooperatives excluded) and the lower limit of deposit rate of financial institutions, which were released on October 29th, 2004, are a milestone measure in the process of the interest rate's marketization in our country, marking that it has successfully attained its staged goal of the upper limit of lending rate. This policy constructs an overall frame for the reform of the interest rate's marketization in the present stage.With the increasing open-up of China's finance, the banking industry in our country is confronted with the challenge of further open-up and marketization. As the core tool in financial market, the interest rate is bound to be marketized, in order to adjust the supply and demand of funds and regulate the competition. The commercial banks in our country, especially state-owned ones, which have long been influenced by national policies, have been accustomed to the operation under national policies, but haven't formed perfect market mechanism and corresponding management mechanism after a series of reforms. The marketization of interest rate has a profound impact upon the external surroundings, management, financial tools, products and service of commercial banks, both advantageous and disadvantageous. Therefore, the commercial banks must maximize favorable factors and minimize unfavorable factors in the reforms of interest rate's marketization, through a series of adjustment in the strategies, purpose as well as organization of management, to better and amplify the internal control system, to promote the capability of easing risks, to enlarge new profit aspects, and to adapt to the trends of interest rate's marketization.This paper reviews the process of interest rate's marketization in our country, summarizes the current situation of it, analyzes its methods, and provides corresponding suggestions for the choice and determination of the core-base rate in it. On the basis of it, this paper also reveals the objective surroundings that the banking industry in our country requires and the analysis that it faces in the reforms of interest rate's marketization, and puts forth the strategies in the operation and management of commercial banks in our country.