Comprehensive Reform of RMB Exchange Rate Regime and Its Impact on Commercial Banks

The paper gives the guideline, background and concrete path for comprehensive reform of RMB exchange rate regime, a systemic project that centers around the reform of RMB exchange rate formation mechanism under an improved foreign exchange market and foreign exchange administration system. It is believed that that while RMB exchange rate formation mechanism is being improved, efforts should be made to accelerate the marketization of foreign exchange administration system and the construction of domestic foreign exchange market with the intention of establishing a managed floating exchange rate regime based on market supply and demand and adjusted with reference to a basket of currencies. Such a reform will produce enormous impact on commercial banks in terms of assets liabilities, exchange rate risk, internationalization process and business development. Therefore, commercial banks should change their operational concept, risk management mode and development strategy to meet proactively the ensuing challenges and opportunities.