The CBRC Issues the Guidelines on the Risk Management of Bank Account Interest Rate of Commercial Banks

In order to enhance the awareness of risk management of bank account interest rate of commercial banks, further strengthen the risk management of bank account interest rate, foster the establishment of a comprehensive risk management system of commercial banks and promote the implementation of the New Basel Capital Accord in China, the CBRC lately issued The Guidelines on the Risk Management of Bank Account Interest Rate of Commercial Banks (hereinafter referred to as the Guidelines). The Guidelines apply to banks that will or are willing to implement the New Basel Capital Accord and those other commercial banks that temporarily will not adopt the Accord. It is an important composition of the series of policies and regulations concerning market risk management of commercial banks and also a crucial part of the guidelines framework of implementing the second pillar of the New Basel.

The Guidelines compose of five chapters and thirty-seven articles, in which it gives specific provisions to the risk management system of bank account interest rate, the techniques and measures of bank account interest rate risk management and the supervision and inspection of bank account interest rate risk management, etc.

First of all, it defined the scope of application of the Guidelines, the overall requirements of bank account interest rate risk management and the supervision and inspection of regulatory authorities. Secondly, the Guidelines made specific requests towards the establishment of risk management system of commercial banks’ bank account interest rate, including aspects such as governance structure, management policies and procedures, quota management, accounts, audits, performance management, management information system and internal control. Thirdly, the Guidelines requested that commercial banks should identify bank account interest rate risks and use all kinds of methods to measure risks of all sources according to the character, scope and complicity of the bank’s business while determining the future trend of the interest rate. Furthermore, it explicitly defined the responsibilities of supervision and inspection, regulatory approaches, the content and measures of supervision and inspection of regulatory authorities. Fifth, it stipulated the scope, grace period, interpretation institutions and the time of implementing of institutions that adopted the Guidelines.

According to CBRC, the financial crisis has, to some extent, reflected the necessity of regular assessments of banks and accurate measurement of bank account interest rate risk profiles and the importance of strengthening risk management of bank account interest rate when there is frequent fluctuation among market interest rate and huge adjustments of benchmark interest rate. The issuance of the Guidelines will enhance the awareness of commercial banks’ bank account interest rate risk management, promote the risk management level of commercial banks’ bank account interest rate and propel the implementation of the New Basel Capital Accord within China’s banking industry. It will also help commercial banks to match the requirements brought by the marketization of interest rate, to effectively respond to the adverse external environment, to promote the sound and stable development of the banking industry and to effectively support the rapid development of our economy and society.