The impact model of interest rate liberalization reform on the profitability of state-owned commercial banks : a case study of bank C of China

Abstract

This paper explores the definition and development of interest rate marketization in China and its impact on the profitability of state-owned commercial banks. The reform, characterized by the People's Bank of China's gradual easing of interest rate controls and expansion of the benchmark interest rate's floating range, enhanced financial market flexibility and efficiency but challenged traditional banking profit models based on interest margins. Through qualitative case studies and thematic analysis of the Bank C of China (Bank C), the study finds that Bank C effectively mitigated these challenges by optimizing asset-liability management, adjusting asset and liability structures, and employing proactive risk management. These measures improved its investment returns and profitability. Additionally, Bank C's adoption of countercyclical strategies and advancements in digital transformation and process automation helped sustain its profit model. The research concludes that Bank C's strategic adjustments enhanced its profitability and competitive edge, offering insights for other banks in similar market conditions and aiding predictions of financial market trends.