Chinese Commercial Banks To Exchange Rate Risk Management

After the collapse The Bretton Woods system in the 70' of 19th century, the severe fluctuation of exchange rate makes people feel the destructiveness of the exchange rate risk profoundly that becomes the main risk in the commercial banks.Considering the risk, the theorist and practitioner of western commercial banks have plenty of the research work and devised many risk managerial models as well as products in order to avoid the loss in earnings or economic value of commercial banks. Nowadays , the management of exchange rate risk of western banks is the important task in daily managements. From 1994, our country established the exchange rate system, which is managed floating exchange rate system on the basis of market's supply and demand. From July 21, 2005, our country has begun to implement a new exchange rate system, which is managed floating exchange rate system on the basis of market's supply and demand, according to a basket of currencies to adjust. On premise of exchange rate marketing, the exchange rate will take on more volatile and uncertain , which will express in the increasing exchange rate risk and how to enhance the exchange risk management in the commercial banks .But our country has implemented exchange rate control for a long time ,the commercial banks ignored the management in exchange rate risk ,without adopting appropriate means and tools to measure the exchange rate risk. Therefore ,the research on exchange rate risk in our country has already no longer just a forward-looking topic, but has been realistic.This paper tries to systematically investigate the measure models in exchange rate risk, based on the advanced experience of the international commercial banks in this field , analyses the features of the exchange rate risk from theory to practice, finally discusses the topic how to establish the exchange rate risk management system for the commercial banks .This thesis is consisted of seven chapters. Firstly, the preface introduce the intention and methods of research , and concluded the literature of the exchange rate risk management in foreign commercial banks . secondly, it analyzes the classification and reasons of exchange rate risk; thirdly, it recommends management technology of exchange rate risk which is foreign exchange exposure management,foreign exchange duration management and foreign exchange rate fluctuation management; fourthly, it measures the exchange rate risk in China commercial banks by the foreign exchange exposure model,VAR model and stress test model; fifthly, this article analyzes the systematic obstacles which give negative effect on the foreign exchange rate risk management in our commercial banks; lastly, this paper explores the foreign exchange rate risk management system based on management actuality in China commercial banks.As far as the exchange rate risk is concerned, it is a systematic project, which demands the commercial banks to accommodate the process of exchange rate marketing. We can establish the scientific,advanced,suitable exchange rate risk management mechanism which should correspond with the socialistic economy system, based on the practice of exchange rate management in foreign commercial banks and the peculiarity of our commercial banks .