An Analysis Of The Soundness And Diversity Of Different Types Of Commecrial Banks In China

In modern economic system, finance has already become the core of development and it isplaying a very important role in economic growth. But at the same time, the turbulence offinancial system can also bring damage to economic, the outbreak of financial crisis can evenbring devastate impact. As the basis of financial system, banking plays a vital role in themaintenance of financial soundness. A lot of theoretical and empirical studies have proved that thefinancial crisis comes after the banking crisis, and the depth and breadth of banking crisisdetermines the depth and breadth of financial crisis. Therefore, to maintain the soundness ofbanking is one of the keys to maintain the soundness of financial soundness. At the present, thebanking in China is facing the pressure from both outside and inside. On the one hand, China hasopen the financial market to foreign banks, the abundant capital and the higher service,management, risk control skills of foreign banks have bring more and more external pressure tothe development of banking in China. On the other hand, our macroeconomic slowdown currently,the government deepens the reform of banking constantly, the number of commercial banks isgrowing steadily, these aspects all has brought big internal pressure to banking system. Based onthis background, to study the effects of macroeconomic and monetary policy on bankingsoundness and to measure the risk spillover effect between banks has very important theoreticaland practical significance.This paper based on the financial soundness theory and the research of domestic and foreignscholars on banking, using the econometric methods give a systematic and deep research on thesoundness of different types of banks, the relationship between the soundness of different types ofbanks and macro economy, the differences of the effect of monetary policy on bank soundness andthe banking systemic risk spillover effect. The main contents are as follows:First of all, on the basis of the “Financial Soundness Indicators” promulgated by IMF2006and the macro-prudential regulation targets raised by China’s central bank, we have selectedseveral representative indicators on capital adequacy, assets quality, profitability and liquidity of different banks to build the system of China’s bank soundness index system. And using the coreindicators of this system we have composed BSI, which can describe the soundness of differentbanks. Through the analysis of three different types of our commercial banks, we have found thatthe soundness of China’s banks increased significantly, and they were all affected by the globalfinancial crisis. However, the impact on different types of banks was a little different. The affectedperiod of city commercial banks was lagged behind the other two kinds of banks. In addition,compared with the large commercial banks, the joint-stock commercial banks were influenced bythe macroeconomic more remarkable. The trends of the banking soundness shows that the effectof our banking reform since2004is significant, the soundness of banking system increasedsteadily, but was seriously affected by the global financial crisis2008. Although there was noobvious crisis in China, the influence spread to the entire social economy through various ways.The crisis has also brought a shock to the banking system, and caused the decrease of the bankingsoundness. Facing the financial crisis, in order to maintain the steady and rapid economic growth,the Chinese government has carried out series of monetary policy and fiscal policy to stimulate theinvestment and employment in private sector, the soundness of banking system was also recoveredgradually.Secondly, this paper analyses the impact path of shock between macroeconomic and differenttypes of banks by constructing a PVAR model. The results of the impulse response shows that: thecredit growth is advantageous to the soundness of banks, and the effect on city commercial banksis the biggest, on joint-stock commercial banks comes the second, on large commercial banks isthe smallest. The stock market index has a positive effect on the bank soundness, and the impacton city commercial banks is more durable. The economic growth has a positive effect on banksoundness in the short term, but it change to negative in the long term. The soundness of largecommercial banks hardly has any influence on credit scale, and the soundness of joint-stockcommercial banks has positive impact on credit scale, while the raise of the soundness of citycommercial banks will decrease the credit scale. At the same time, the result of the variancedecomposition shows that: the stock market index impact the soundness of joint-stock commercialless than the other two types of banks. The contribution of credit growth and the economic growthto the soundness of all three types of bank is very small. From the view of the effect of the banksoundness to macroeconomic we can find that the joint-stock commercial banks impact the stock market more significant than the other two types of banks, the city commercial banks impact thecredit scale more than the other two types of banks, and the soundness of large commercial banksand joint-stock commercial banks impact the economic growth more significant than citycommercial banks.Thirdly, we analyze the impact of monetary policy on the soundness of different types ofcommercial banks by using the panel quantile regression method, and from the result we can findthat the relationship between the soundness of three types of banks and exchange rate are allnegative. Large commercial banks affected by exchange rate more significantly, and the effectdecrease gradually as the soundness of large banks increase. The relationship between interest rateand the soundness of all three types of banks are all positive. The influence of interest rate on citycommercial banks are more significantly, and the effect decrease while the soundness increase. Inaddition, the effect of interest rate on the soundness of joint-stock commercial more than citycommercial banks. Through the effect of credit growth, we can come to the conclusion that thesoundness of large commercial banks decrease while credit increase, but the soundness of citycommercial banks hardly has response to credit growth. But for the joint-stock commercial banks,when its soundness is in the low section, credit growth will bring negative effect, but when itssoundness is high, credit growth will bring positive effect.Fourthly, we establish a CoVaR model, measure the risk spillover effect of the three types ofsixteen commercial banks in extreme quantile (=0.05) by using quantile regression technique.Though the effect that variety of financial risk made to the extreme risk of banking institutions, wecan find out that the fluctuation of stock market profit and stock market price can raise theextreme risk of banks, and this kind of effect plays most significantly on city commercial banks.The difference of interbank interest rate and yield rate to maturity can reduce the extreme risk, andthe effect is more significant on joint-stock commercial banks and city commercial banks. Termspread can also reduce the extreme risk, but the effect is not obvious on most of the banks. On thisbasis, we calculatedVaRti,CoVaRti, and CoVaRtsystem|iof each bank under quantile0.05, foundthat CoVaR can measure the risk of each bank and its spillover effect on the system better.CoVaR of large commercial banks are larger than those of joint-stock commercial banks and citycommercial banks. By sorting the CoVaRtsystem|iwe can find that the top four contributors to thesystemic risk are all from large commercial banks, other banks’ contribution didn’t show regular rules. But we can find that city commercial banks’ contribution to systemic risk is influenced bymacroeconomic more significantly than the other two types.