The Impact Of Changes In Interest Rate Policy On The Operational Performance Of Commercial Banks

In recent years, The People’s Bank of China has adjusted the interest rate policy accordingto the macroeconomic trends frequently. With the deepening process of marketization of interestrate as well, interest rates which are determined by supply and demand will change morefrequently at a larger range. As the direct objects of interest rate policy, China’s commercialbanks are affected by interest rate adjustments resulting from the close relationship betweenbank’s spread-based income with interest rates. At same time, the interest rate adjustment willalso affect the operational behavior of commercial banks through the transmission of policysignals. Studying the interest rate factors in the operational performance of commercial banksdeeply, will help banks to clarify the proportion of earnings, adjust targeted business structure,consolidate and enhance the operational performance in marketization of interest rate.This article is based on China’s16listed commercial banks between2006and2012. Firstly,we use the principal component analysis method to calculate the comprehensive evaluation ofperformance of banks as the dependent variable, while picking the weighted average of one-yearlending rate as the independent variable. Then, we build a panel model to research the impactwhich caused by interest rate policy on the operational performance of commercial banksempirically, and distinguish the results between state-owned banks and non-state-owned banks.So, we can conclude that: the impact of interest rate policy on operational performance ofcommercial banks is significantly negative in current year, and only showing a certain lag effectin state-owned banks. The operational performance of state-owned banks is more sensitive thannon-state-owned banks when the interest rates change. Finally, this article make several policyrecommendations for commercial banks to consolidate operational performance, including:promoting the diversification of profitable channel, strengthening the forecast of interest ratesbanks and continuing the reform of property rights.