A Comparative Study Of Commercial Banks Risk Management On The Bases Of Interest Sensitive Gap Model

The interest rate risk is one of the main risks that is being faced by commercial banks. This research contains the data of seven listed banks of China and seven listed banks of Middle East from year2006-2013. Interest rate sensitive gap (ISG) model is used to analyze the data for four factors; interest rate sensitivity gap, gap ratio, interest rate sensitivity ratio and the degree of deviation from interest rate sensitivity gap ratio. The results show that commercial banks in China are facing several problems like: Long-term asset-liability matching is not balanced, holding money for long period and extending loan for short period, state-owned bank’s interest rate risk management and flexibility is generally weaker than the joint-stock banks, not enough emphasis on thought, lack of tools and mechanism to judge and predict the interest rate movement. Besides the problems of Chinese commercial banks, the Middle East Countries are facing; bad risk strategy, interest rate and risk management and don’t have a good strategies to overcome risks. Secondly, the people working in these banks are not well qualified and professional in risk control. During our research, we found that the commercial banks in China are supposed to accomplish the following two steps to prevent the interest risk. The first is to set up a special ALCO, so that they would be able to enhance the ability of forecasting interest rate trend by training the team for further development of interest risk measurement models. Furthermore, they have to optimize the assets and liabilities of business to expand non-interest income. While the commercial banks in the Middle East have to pay more attention in the fields of risk management and improve their strategies to control the risk.