Research On The Impact Of Interest Rate Marketization On China’s Commercial Banks’ Profit Model

Interest rate marketization has been conducted for almost 20 years in China, now it has came to a key stage. Loans and deposits interest rate liberalization will inevitably affect the deposits and loans business of Chinese commercial banks, which is their major business and income source in the past period. Besides, considering the imperfectness of Chinese financial systems, financial disintermediation and the impact of Internet finance, Chinese commercial banks’ profitability is experiencing a strict challenge.This thesis will study the-impact of interest rate liberalization on profit models of Chinese commercial banks. The study will begin from the Chinese interest rate liberalization reform, and conduct the analysis theoretically and empirically. In the first part, the thesis will study experiences of America and Japan, and provides suggestions for china’s commercial banks. American and Japanese experiences indicate that commercial banks’ operation faced difficulties temporally after the initiation of interest rate marketization.In the part of empirical analysis, this thesis utilizes yearly average of deposit and lending interest rates in period 2005-2014 and conducts random effects analysis. Then, this part conducts VAR Model and impulse response analysis by using data of Shibor in period 2005-2013.The finding is that interest rate liberalization has impact on profit models of Chinese commercial banks. Different banks have different impacts.Based on the results of theoretical and empirical Analysis, this thesis concludes that interest rate marketization does have impact on china’s commercial bank. Therefore, the traditional profit model of commercial banks, which heavily rely on the interest rate spread between deposit and loan, should transform to the balanced profit model, in which middleman business is significantly facilitated.