Research On The Effect Of Interest Rate Marketization On The Credit Risk Of Urban Commercial Banks In China

On October 23,2015,the People's Bank of China announced the liberalization of the deposit interest rate ceiling,which meant that the marketization of interest rate in China basically completed^[1].According to the research of many scholars at home and abroad,liberalization of interest rate will increase the finance market competition degree,then the increasing finance market competition will decrease bank's net interest margin,then the decreasing bank's net interest margin will change the bank`s operation and management method,especially,for city commercial banks,which rely heavily on loans,the liberalization of interest rate will affect the credit risk level of city commercial banks badly.Through theoretical demonstration and empirical analysis,this paper studies the effect of interest rate marketization on the credit risk of urban commercial banks.Theoretica l demonstration is mainly to sort out and summarize the relevant theories of interest rate marketization,theories of credit risk and the impact of interest rate liberalization on credit risk level.Finally,the paper shows us the present situation of urban commercial banks in China,their credit risk and the management of their credit risk.Theoretical part concludes that the total assets and total liabilities of our city commercial banks accounted for higher and higher in that of the banking financial institutions in last few years.At the same time,city commercial banks also face bad loans rise problem,so,I proposal credit risk managers need to strengthen credit risk management.In the empirical analysis,the paper establishes a dynamic panel data model on the basic of sample data of 54 city commercial banks in 2008-2016 years.Specifically,this paper chooses the rate of non-performing loan rate to represent credit risk,the comprehensive index of interest rate marketization represents the degree of interest rate marketization,three banking level control variables and two macro level control variables.Finally,after comparing the regression results of system GMM and differential GMM,we choose the system GMM to estimate the effect of interest rate marketization on the credit risk of urban commercial banks.The results show that the greater the degree of interest rate marketization,the smal er the credit risk of city commercial banks.At last,I put forward some related suggestions to decrease the credit risk of city commercial bank.