| Along with accession to the WTO,the pace of opening to the outside world and internal reform has been gradually accelerated,which has brought about a profound adjustment of the business structure of commercial banks.Interest rate liberalization made the narrowing of deposit and lending spreads an irreversible trend.The direct financing mode was advancing by leaps and bounds,catalyzing the profound changes in the financial structure dominated by the indirect financing of traditional banks.Internet finance and third-party payment have risen sharply and eroded the territory of the banking industry’s initial payment intermediaries.With the expansion of city commercial banks,the restructuring and reorganization of rural commercial banks and the opening policy of private banks,commercial banks are facing unprecedented pressure of external competition.Expanding new business has become the core theme of commercial banks’ operation and management at this stage.The level of off-balance-sheet business(thereafter,OBS)development is the concentrated expression of commercial bank business innovation.For the first time,Kabir Hassan et al.(1993)included OBS business into the analytical framework of bank performance and risk-taking impact.Foreign scholars conducted extensive studies on bank data from different countries(eg,Smith et al.,2003;Calmès & Théoret,2010,2015;Alaa Guidara et al.,2016).The findings are also inconsistent.Due to the separated financial supervision system in our country,the proportion of OBS business in the overall income structure has been hovering at a relatively low level,and the related research is relatively rare.After the 2008 financial crisis,with the introduction of a series of policies such as the 4 trillion economic stimulus plan and the joint promotion of both supply and demand sides,the OBS business of commercial banks expanded explosively and the scale expanded to a record high of 253.52 trillion yuan,which exceeded the total on-sheet assets.While national banks,city commercial banks and rural commercial banks compete with each other in the traditional credit market,they deepen their industry cooperation with non-bank financial institutions such as trusts,securities and funds,and innovate OBS business models.In order to promote financial innovation and maintain financial stability,Regulatory agencies have published series policies,OBS business is moving towards the standardization of development.However,due to the large differences in scale of operation,business scope,resource endowments and regulatory requirements,different types of banks bear different socialresponsibilities in our country.Therefore,it is of great practical significance to explore the feasible route for the development of OBS business of different types of banks in light of China’s national conditions which would help realize the transformation of commercial banks and enhance their competitiveness,so as to promote the essential functions of financial services entities.Based on the data of nearly 200 commercial banks from 2009 to 2016 after the financial crisis,this article establishes a overall framework of the influencing factors on the development of OBS business,focusing on the most important external environmental factors that commercial banks are experiencing in the competitive environment,and also the so called commercial banks “three principle”,profitability,safety and liquidity;On this basis,combining with the close relationship between OBS business and credit business,direct financing,as well as the typical characteristics of regulatory arbitrage,this paper explores the inherent logic and comprehensive effect of OBS business on bank profitability and risk-taking,and concludes that different types of banks should adopt differentiated OBS business development strategy.The main conclusions of this paper are summarized as follows:First,intensified competition is an external direct incentive for commercial banks to expand OBS business.The management level is the major internal factor that restricts the increase of OBS income.For national banks,the greater the market power,the higher level of OBS operations.For city banks,when the market power is relatively small,they are more inclined to expand OBS businesses to expand the sources of profits;otherwise,they would focus on the traditional credit business.At this stage the level of operation and management is the primary factor affecting the rural commercial banks to develop OBS business.OBS is an innovative business with higher risk,so banks with higher risk appetite would be more aggressive to develop OBS business.National banks are facing greater structural liquidity problem,and OBS operations are,to some extent,considered as liquid Management means,the lower the level of liquidity,the higher the enthusiasm to expand OBS activities.Second,business transformation and adjustment of income structure,supervision arbitrage of OBS business and the use of cross-selling tactics have resulted in obvious substitution effect of OBS business on the net interest margin of traditional credit businesses.the national banks adopted a cross-selling strategy,taking the initiative to reduce traditional business charges and develop OBS business so as to obtain long-term profit growth.Citycommercial banks and rural commercial banks expanded their business scale to realize regulatory arbitrage by OBS financing and squeezed the traditional credit business scale and interest income.Therefore,the impact of OBS business on bank profits and risk-taking is quite different among different types of banks.National banks increased their return on assets and lowered their portfolio risk by increasing the proportion of OBS businesses,while facing greater level of bankruptcy risk exposure.For city commercial banks,OBS businesses increased their return on assets and reduced their earnings volatility,while assets Portfolio risk can be reduced.For rural commercial banks,OBS business has raised the return on assets,meanwhile the earnings volatility has increased,and hence the risk-adjusted returns have not been significantly improved.The OBS business has a positive effect on the return and risk-taking of shareholders for all types of banks,so that using ROE measurement will overestimate the profitability and underestimate the risk of OBS activities,which provide theoretical support for the regulatory authorities to strengthen capital supervision.Third,securitization of credit assets(Thereafter,ABS)helps to revitalize stock assets,expand funding sources and realize light asset operations,and promote the coordinated development of traditional credit and OBS operations.Based on the data since ABS was restarted during 2012-2016,and using the method of propensity score matching and difference in difference model analysis(Sarkisyan et al.,2013),this article finds that compared with the non-issuing banks,the initial ABS issuing banks have higher return on assets and higher NPLs,especially after the realization of market-oriented issuance of ABS during 2015-2016,which means,to some extent,that commercial banks increased their risk-taking appetite while expanding sources of funds.As the scale of ABS accounts for a relatively small proportion of the credit assets for national banks,this effect is more obvious in city and rural commercial banks.Therefore,this paper suggests different types of banks to adopt differentiated OBS business strategy.National banks should adhere to the diversified route and upgrade the innovation level of OBS business,focusing on direct financing business and enhancing the underwriting of investment banking business.Rural Commercial Banks should focus on local credit markets,and enhance management capabilities and reputation through acceptance and guarantee activities,so as to expand credit customer value-added services and obtain higher credit margins(DeYoung & Rice,2004).At the same time,the national banks should activelytake advantage of ABS business to coordinate credit and OBS businesses.Rural commercial banks should prudently promote the ABS business to avoid blind expansion of credit subjects which would be more likely to increase risk-tanking and decline asset quality.City commercial banks should respectively take the national bank and rural commercial bank’s OBS strategy.This article also puts forward regulatory policies and industry norm recommendations.This article explores the inherent logic of OBS business affecting bank performance and risk-taking,and draws different economic consequences for different types of banks,which would enrich relevant research literature.Through researching on ABS business,This paper opened up new ideas for related research,making up for the lack of empirical research.This article at the same time provides a theoretical basis for the regulatory department which recently introduced the differentiated regulatory policy to promote commercial banks to serve the real economy. |
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