Interest Rate Risk Measurement Of State-owned Banks During The Deposit Interest Rate Marketization

On March 1,2015,the central bank turned down interest rates again-cutting 25bp to the deposit and lending benchmark rates,and extended the deposit rate floating range from 1.2 times of the benchmark to 1.3 times,releasing a signal to the market that the deposit interest rate reform is in full swing.Thus,with consideration of the policy background,this paper starts from deposit interest rate marketization.As state-owned banks play important roles in our society,its measures to deal with the deposit interest rate marketization becomes an important and urgent topic.So this paper aims to measure interest rate risk of state-owned bank during the deposit interest rate marketization.This paper divides all the bank accounts into bank accounts and trading accounts.For bank accounts,the paper uses the interest rate sensitivity gap model and the duration gap model,and finds these important results:(a)During the deposit interest rate marketization,the four state-owned banks have smaller interest rate risk in the long-term,and interest rate risk is mainly accumulated in the short term,especially in the ultra-short term.(b)Relatively,interest rate risk of net interest income maxes in ABC,interest rate risk of net interest margin maxes in BC and performance of the four state-owned banks is better when excluding demand deposits account and legal reserve account.(c)Before excluding demand deposits account and legal reserve account,interest rate risk of net worth in descending order is:ABC>CCB>ICBC>BC;and after these two accounts,the new descending order is:ICBC>CCB>ABC>BC.For trading accounts,the paper chooses interbank transactions as a typical example and uses the VaR model to measure the extreme loss of this account,to characterize the state-owned banks' interest rate risk in trading accounts.Than the paper finds that interest rate risk in interbank deposits accounts is mainly linked to the frequent fluctuations in account volume,and has little relationship with interbank rates.Thereafter,the paper further measures interest rate risk in bank accounts in an overall perspective.With using function and critical value,the paper investigates the effect of changes in deposit interest rates on state-owned banks' operating margin(OPR),to analyze the specific impact of interest rate shocks on bank profitability.On the other hand,with using correlation coefficient,simulation and antithesis,the paper investigates the effect of saving-loan spreads changes,which is only because of changes in deposit interest rates caused by marketization,on state-owned bank's overall financial performance.Wherein,when the use of simulation,the paper also considers the yields of financial products and Internet financial monetary fund.At last,the paper finds that:When deposit rates rise due to marketization the four state-owned banks' operating margin(OPR),the total return on assets(ROA)and return on equity(ROE)will all appear decreased,and interest rate risk of profitability and overall financial performance in descending order is:ABC>BC>CCB>ICBC.Finally,this paper concisely offers research conclusions about the interest rate changes and state-owned banks'interest rate risk measurement under deposit interest rate marketization,and based on the conclusions gives 3 aspects of a total of 8 practical suggestions.More than that,this paper creatively gives more "personalized"suggestions as follows:(a)the Bank of China(BC)ought to accelerate building the independent pricing mechanism and expand measurement method of interest rate risk,and pay close attention to the securities operation which may lead to interest rate risk at the same time;(b)the Agricultural Bank of China(ABC)ought to maintain advantages on balancing sheet date and accelerating building independent pricing mechanism,and pay close attention to the credit policy and the interest rate risk of exposure as well;(c)the Industrial and Commercial Bank of China(ICBC)ought to maintain advantages on building of independent pricing mechanism,and improve comprehensive management abilities of assets and liabilities at the same time;(d)the Construction Bank of China(CBC)ought to maintain advantages on independent pricing mechanism as always.These personalized suggestions is an innovation of this paper.