The Study On The Effect Of Deposit Interest Rate Liberalization To Chinese Commercial Bank

In 2012, the central bank implemented the reform measures that lending rates could float down 30% based on the benchmark line, and deposit rates may float 10% above. In 2013, central bank canceled the cap of lending rates, which indicated that loan interest rate liberalization of Chinese commercial bank has basically completed and the next focus of reform is the deposit rate liberalization. In 2013, internet finance was rapidly developing along with the trend of financial disintermediation increasing, which would accelerate the deposit interest rate liberalization reform. So it becomes increasingly important to research on the effect of deposit interest rate liberalization to Chinese commercial bank in the new era.This paper is based on the loanable funds theory and financial liberalization theory, and sums up the reform practice of foreign interest rate liberalization. On this basis, I use the data analysis methods and empirical analysis methods to research the effect of deposit interest rate liberalization to Chinese commercial bank’s industry competitiveness, profitability, and risks from the perspective of "macro environment", "competition" and "internal management" combined with large amounts of data. And then this paper provides recommendations for Chinese commercial banks about how to cope with problems better in the background of the deposit interest rate liberalization reform.According to the foreign data, we conclude that deposit interest rate liberalization would make the deposit interest rate rise, the volatility of interest rates increase and the difference of deposit and lending interest rate be narrow quickly in short term and be wider gradually in the long run. In addition, we build VAR model to analyze the economic effect. Results show that deposit rates liberalization help promoting the long-term development of the macro economy. Next, we analyze the impact of commercial banks deposit interest rate liberalization combined with a large number of domestic and foreign data and financial statements of commercial banks in China, concluding that deposit interest rate liberalization would reduce the operating profit, cut profitability down, and increase the credit risk and interest rate risk of commercial bank. Small bank’s ROE will be lower than large bank’s. Lower share in the market make small banks a competitive disadvantage. So commercial banks in different scale should make full use of their comparative advantage, accelerate the restructuring of business structure, develop intermediary business, strengthen the innovation of financial products and continuously improve their product pricing abilities and interest rate risk management capabilities, to cope with the impact of deposit interest rate liberalization.