Research On Commercial Banks’ Risk Management Of Exchange Rate In The Background Of RMB Appreciation

On July21,2005, China began to implement a market-based and the reference to a basket of currencies, managed floating exchange rate system. Since then, the exchange rate of RMB has violated more frequently than before, and consequently, the foreign exchange risk facing China’s commercial banks has increasingly demonstrated its existence. Especially in recent years, with the rapidly economic development and long-term trade surplus of china, European and American countries press the worse for the appreciation of the renminbi pressing. And china also has been stepping up the financial system reform process and gradually relaxing capital controls, In this context, China’s commercial Banks were facing more foreign exchange risk.Since the1980s, a series of financial crisis in the international shows that:If one country processes improper in preventing financial risks problem, financial crisis may happen, and financial crisis often will develop into the economic crisis, and even the social crisis. Chinese commercial bank is the core of the financial system, and financial security is the core of the national economy security. So commercial Banks exchange rate risk management has very important significance for the stability of our financial system and the health development of our entire economic and the harmony of social. We must take full attention in the strategic and the operation.It is worth noting that, present Chinese local currency exchange rate appreciation is similar with the situation of1980s In Japan. With the current of the appreciation of the renminbi, are the Chinese Commercial Banks also facing the same huge impact as Japan banks? We should find out the gain and loss of Japanese strategy and the experiences and lessons to be learned which China can use for reference.It has very important practical significance for perfecting exchange rate risk of chinese commercial banks management mechanism, and maintaining financial stability. The paper through the contrast with the yen appreciation background in1980s, using the qualitative analysis and quantitative analysis method, learning international advanced experience and contacting the reality of China, in accordance with the basic process of the risk identification, risk measurement and risk control, from macroscopical to microcosmic, makes the research and puts forward relevant policy suggestions finally. This article is divided into six parts.The first part is introductory remarks, including the main research background and significance, introducing a general survey of the theme and the framework of the paper; The second introduces the definition and type of exchange rate risk, management principles and procedures, measurement method, etc.; And discusses the foreign advanced experience and China’s commercial Banks exchange rate risk management situation; The third reviews the influence of the yen appreciation to the Japanese financial institutions; Then the paper analyzes the similarities and differences between Japan and China; Summarizes the revelation that we should obtain from both the external environment and their own building; The fourth analyzes the influence of yuan appreciation to China’s commercial Banks from six sides (including foreign exchange risk, foreign capital, capital adequacy ratio, deposit-loan ratio, profitability, and foreign exchange finance products); The fifth is the empirical analysis part. The paper uses two methods of foreign exchange exposure analysis and VaR to analysis the risk of exchange rate condition of China’s commercial Banks at present; the sixth gives some Suggestions to improve Chinese commercial bank exchange rate risk management.The main conclusions of this paper are as follows:First, the paper summarizes the teaching of yen appreciation, and gets enlightenment from two aspects of the external environment and internal management respectively. In the external environment, it should be noticed to maintain exchange rate appreciation of progressively and open capital market moderately, and at the same time strengthen financial supervision; In the internal construction, the bank shall improve the exchange rate risk awareness, make rational management strategy, and bad loans paid close attention to the problem.The second, we found that many business of commercial Banks in China are facing greater exchange rate risk, we should pay enough attention.The third, using foreign exchange exposure method, we found that, Chinese commercial bank’s foreign exchange risk are still in the higher level; In five major foreign currencies, the return rate and volatility of dollar are both minimal:The risk of the bank of China is very big. Using VaR method,we found that state-owned commercial bank’s exchange rate risk were bigger than joint-stock commercial banks relatively; The VaR method based on GARCH (1,1) model has high application value in the commercial bank management of exchange rate risk.This mainly features of the paper are as follows:First, specifically contrast the currency exchange rate risk of the banking industry between the China and Japan, Then proposes some suggestions to improve China’s risk management of commercial bank from two sides of the external environment and the management of banks.The second, the paper analyzes the influence of yuan appreciation to China’s commercial Banks from six sides (including foreign exchange risk, foreign capital, capital adequacy ratio, deposit-loan ratio, profitability, and foreign exchange finance products).And put forwards some improvement strategy.The third, Using foreign exchange exposure method and VaR method based on GARCH model to analyzes the risk measurement of7Banks quantitatively. It helps we know the actual conditions of china’s commercial bank.The forth,based on the theory and empirical analysis, according to a macroeconomic and global perspective, and considering many factors impact,we give a systematic and specific policy recommendations from four sides of the international strategy, national policy, bank operation and business operation.In the current grim situation, It has become the urgent matter of the commercial Banks to improve the ability to resist the risk of exchange rate. Commercial Banks should improve their management level and control the risk of exchange rate effectively, then improve their international competitiveness. It is hoped that the research of this paper can provide decision-making basis and theoretical reference for financial institutions, exchange rate risk management institutions.