Empirical Research On The Fragility Of China's Commercial Banking System

The global financial crisis caused by American subprime mortgage crisis has mauled the global economy heavily since the summer of 2007. Nowadays, although the financial crisis has past, its impacts still make us vividly. The financial crisis can be seen as following analyzed from its generating process. Firstly, the fragilities of bank system increase because the whole system has been influenced by many factors. Then, it develops as a bank crisis and global financial turmoil. Finally, it makes a severe devastating harm to the global economy.The core of the nation's economy is financial, among which the bank is the essential parts, so whether the bank system is stable has a significant effects to the substantial development of the economy. The banking system is such a predominant in the finance of China that its stability is combined with the development of finance. Therefore, study the fragility of the banking system in order to recognize the fragility problem of the banking system correctly, analyze the cause of it, discover the quantity change characteristics of the fragility of the bank by measurement study has a important practical significance to against and defuse banking crises, maintain the stability of the Chinese banking system as well as healthy development of the banking system.Firstly, this article carried on the review and the reorganization to overseas and the domestic related literature and made an explicitly definition to the concepts of fragility, the bank fragility, the financial fragility, the bank crisis, the bank risk and so on. Then, it made an in-depth analyze to the formation mechanism of the bank system fragility. The exogenous factors include the economic cycle point of view, monetary policy point of view, economic structure, financial asset price fluctuations and institutional arrangement. And the endogenous factors include information asymmetry and moral hazard, bank run, government guarantee and behavioral finance. At last, it analyzed the current fragility situation and the influence factors of the banking system. It described the current situation by bad loans, capital adequacy ratio, profitability and liquidity risk. The influence factors are divided into two aspects. The exogenous factors include supervision system flaw, the impact of financial openness, soft budget constraint and the lack of legal spirit and credit culture. The endogenous factors include the property right system defects, financing single structure, internal management bank system problems and incomplete information. The foundation of this paper is the construction of the index of the bank system fragility in China and the comprehensive measure of the fragility of Chinese banking system by employing the dynamic factor analysis on the basis of current research that inside and outside of our country. The empirical research shows that the bank system fragility of China is declining and has a phase characteristic by testing 20 years data from 1990 to 2009. Then, the paper divides the fragility index into 5 stages, analyses the dynamitic change of the bank fragility by combining with the actual situation in our country, and fully describes the fragility comprehensive changes of our country in nearly 20 years. At last, it measures the fragility of 12 banks in our country by using the entropy method. The results show that the fragility of state-own bank if generally lower than the joint-stock banks. It is helpful for the banks to learn from each other and maintain the stable of bank system.