Interest rate risk refers to the possibility that uncertainty in changes in market interest rates will cause losses to commercial banks. In the "Interest Rate Risk Management Principles" issued by the Basel Committee in 1997, interest rate risk is defined as: changes in interest rates cause a commercial bank's actual returns to deviate from expected returns or actual costs to expected costs, causing its actual returns to be lower than expected returns. Or the actual cost may be higher than the expected cost, causing the commercial bank to suffer losses. For commercial banks, the management of interest rate risk can be divided into two types of accounts: bank accounts and trading accounts. The interest rate risk of bank accounts mainly considers deposits and loans and other businesses, and is measured by the asset liability management system. The interest rate risk of trading accounts mainly considers Businesses such as open market capital transactions are mainly measured by the market risk management system.

Current interest rate risk management has proposed many new methods, which effectively avoid the above problems, such as:

1. Dynamic simulation: through customer behavior simulation, business change simulation, interest rate changes Simulate to accurately measure the bank's asset-liability management structure and income changes in the future.

2. Value at Risk (VaR) and Risk Earning (EaR): Through Monte Carlo simulation, combined with the powerful processing performance of current computers, tens of thousands of random paths are generated to estimate a certain period and confidence level. Maximum loss in bank earnings versus bank asset value.

Liquidity Risk Management

Liquidity risk refers to the inability of commercial banks to obtain sufficient funds in time or at reasonable costs to cope with asset growth or The risk of paying debts as they become due. If liquidity risk cannot be effectively controlled, it may damage the solvency of commercial banks.

Liquidity risk can be divided into financing liquidity risk and market liquidity risk. Financing liquidity risk refers to the risk that commercial banks are unable to meet their funding needs in a timely and effective manner without affecting daily operations or financial conditions. Market liquidity risk refers to the risk that commercial banks are unable to sell assets at reasonable market prices to obtain funds due to insufficient market depth or market turmoil. For domestic commercial banks, due to restrictions on investment business, they are currently mainly facing financing liquidity risks.