Optimal Model Of Asset-Liability Management Based On Constraint Of The Matching Of Term Structure

Liquidity risk is one of the most important risks faced by commercial banks. Bank liquidity will not only influence the commercial bank’s reputation and profitability, but also can lead to bank failures in extreme cases, especially when the risk spreads from the banking system to the real economy, it will make the whole nation’s economy in trouble, result in the economic crisis. During the crisis in2008, the bankrupt of international large banks with hundreds years has sounded the alarm to the liquidity, the banks began to pay attention to the liquidity risk.The global financial crisis indicates that the substance of bank liquidity crisis is the misdirection of its assets and liabilities, one of which is the mismatch of assets and liabilities. Conversing short-term debt into long-term loan is the traditional banks’major source of profit. It also determines their high-risk nature. In the case of stable economic situation, this mismatch can be supported by the demand cycles. But when maturity mismatch is serious and the economic situation changes, short-term funds are insufficient to deal with customers’ demand, it is likely to cause commercial bank liquidity risk, therefore, the analysis of maturity mismatch is an important method to measure the commercial bank liquidity risk.Because of the ample macro liquidity and the phenomenon of residents’ high savings, commercial banks could easily obtain funds with a lower cost in the past. Beginning in2007, China’s commercial banks become fully open and face competition from other foreign banks. With the development of joint-stock banks and city commercial banks, the competition among the China’s commercial banks has become increasingly fierce. In recent years, the trend of short-term deposits and long-term loans in our commercial banks is very obvious. At the same time, the slowing deposit growth and the accelerating loan growth make China’s commercial banks face increasing liquidity risk. Therefore, it has practical significance that measuring the banks’ liquidity risk from the perspective of maturity mismatch in commercial banks.The reasonable management of assets and liabilities is very important to make the maturity structure of assets and liabilities rational in the daily management of the bank. The Assets/Liabilities Management (ALM) is to make the most appropriate asset allocation, with the limited funds and the balance of safety, liquidity and profitability. The Assets/Liabilities Management (ALM) is one of the important methods for management of the commercial banks.Based on the theory of bank assets and liabilities management, this paper set up the optimization model of the structure of assets and liabilities whose bounded terms are laws, regulations and administration rules of bank, and whose objective is the maximum of profit-making of bank assets. The model is used to constrain the maturity mismatch situation of Chinese commercial banks and provide decision-making method for bank’s risk management. In the model, using the HP filtering method to select the long-term and stable part of demand deposits, and use it as a long-term source of deposits for asset allocation. The case analysis and model sensitivity analysis prove the availability of the model.15listed banks are selected in the empirical analysis. Their deposit structures are used in the optimization model to obtain their optimal long-term assets ratio. Then the model results are compared with the real ones to measure the bank asset liability maturity mismatch conditions and determine the size of the liquidity risk.The main conclusions of this paper are listed as the followings. Firstly, the increasing in the long-term stable sources of funding in the commercial bank can increase the long term investment ratio in the optimal solution. Secondly, the maturity mismatch problem is universal in the commercial banks of China, the problem in the state-owned commercial banks is more serious than others. Thirdly, the degree of maturity mismatch in joint-stock banks are overall low than that in the state-owned banks. Lastly, and the degree is great different in each city commercial banks is between that in the state-owned banks and joint-stock banks, but considering its small size and low credit, the city commercial banks face greater liquidity risk.Based on the empirical analysis, some suggestions are put forward to solve the problem of maturity mismatch for commercial banks, hoping to provide some reference for China’s banking industry in the liquidity risk management.