Insolvency Risk Research Of China's Commercial Banks

April 2.2007 New Century Financial Corporation declared bankruptcy, the U.S.sub-prime mortgage crisis.September 15,2008,with 158-year-old fourth-largest U.S.investment bank-Lehman Brothers announced bankruptcy protection, It made the global shock.With Bear Stearns, Lehman Brothers, Merrill Lynch had "fallen",the sub-prime crisis evolved into the U.S.financial crisis.U.S. Federal Reserve on September 22,2008 announced It approved request that Goldman Sachs and Morgan Stanley from investment banks became into bank holding company. Managers and the current banking supervisory focused on Bank risk. No matter what kind of form bank risk manifest, once the risk of certain types is an infinite zoom in or mix with other risk beyond the control of banks,It will make the bank's losses and failures,and ultimately the market ruthlessly eliminate.From the legal concept of speaking, that is, banks no longer have the liquidity, loss from continuing operations possible.We call the bank's insolvency risk (insolvency risk) that banks face with insolvent and continue viability of such a forced bankruptcy of uncertainty.From the conceptual point of view, preventing and controling the risk of insolvent banks should be a fundamental objective of risk management.In the United States after the outbreak of the financial crisis, banks without liquidity risk control becomes more important, it is one manifestations of the inherent fragility of the financial system,Controlling the risk of insolvent banks from the global point of view reflects the operating state, through the insolvency risk research, bank managers and regulators can have a clear understanding bank's overall risk status and have a comprehensive understanding of the financial system fragility, on this basis adjust business strategy or regulatory policies so as to maintain continuing healthy development banks,making the financial system and healthy development.At present, one of China's four major state-owned commercial banks, Agricultural Bank of China has just completed a joint-stock reform, that means the transformation of China's state-owned commercial banks has ended.However,It have a certain gap with the competitiveness of joint-stock banks.U.S.financial crisis tells us that we should be in a broader context of international financial and community to look at China's banking industry risk. Objectively speaking, China's accession to the World Trade Organization, in particular, by the end of 2006 after the full liberalization of the banking sector, the system background on the impact of the vulnerability of China's banking industry is bound to be extremely extensive and profound.in the context of the performance characteristics of the vulnerability of the banking industry, generating mechanisms and the means to prevent much more complex than the closed state, it will be more subject to external uncontrollable factors.Therefore, the opening issue of the context of the banking sector vulnerability, not only in practice, the regulators and the banking sector itself is a major challenge, but in theory, is also a great challenge to researchers. Therefore, an objective measure of overall risk status of China's commercial banks is essential, non-liquidity risk is no doubt provide us with a better analysis platform.This paper the first chapter analyzes research background, research significance, research methods and innovation and disadvantage of this article, The second chapter introduces the origin of risk of non-bank liquidity problem, and make a brief introduction that measure the risk of non-bank liquidity indicators of the non-bank Liquidity risk index.Then, in chronological order on foreign and domestic studies of theoretical synthesis.Finally,the right domestic and foreign research results assess.The third chapter analyzes insolvency risk index and the influencing factors of China's commercial banks from the micro perspective.According to insolvency risk index formula of bank proposed by Liang & Rhoades and McAllister & McManus,I revise insolvency risk index combining with the characteristics of China's banking industry,this paper will calculate insolvency risk index of the china's commercial bank and analyze the results based on financial data from 1997 to 2007;and then empirical analysis the factors that impact insolvency risk of china's bank,Finally,According to the above analysis, bank size variables,deposit and loan structure variables,quality of assets variables, ownership structure variables,liquidity variables and variables that affect profitability are key factor variables that affect insolvency risk of china's commercial banks.Chapterâ…£analyzes the insolvent risk of China's commercial banks and the United States commercial banks from the macro level, respectively, and then analyzes the risk of insolvent on the basis of comparative study in China's commercial banks and the United States commercial banks, I obtain China's commercial banks insolvent risk conclusions.Chapterâ…¥firstly forecast insolvency risk of the commercial bank facing, then mainly analyze the China's industrial, agricultural, medium-built four state-owned commercial banks,joint-stock reform have been completed by the state-owned commercial banks into national controlled joint-stock commercial banks.Insufficient capital is a problem in China's banking industry a major challenge.At present, although the four major state-owned commercial relying on the state funding improve the role of capital to complete the joint-stock reform, but the perspective of China's state-owned commercial bank profitability reflect the competitiveness of significantly weaker than that in developed countries in the interbank and joint-stock banks, face with foreign firms and joint-stock banks competition, survival and development of China's commercial banks, the situation is very serious.To shareholding system reform in the banking sector in an invincible position, meaning that species in promoting their businesses, developing new customers on the enhanced initiative. Even in the listing, the four major banks are facing due to the rapid development of business assets,leading to capital shortage problem. Then propose China's commercial bank insolvency risk recommendations.Deposit share transfer and keeping of convertible bonds manner complementary capital is one of the ways. the implementation of diversification strategies and diversify income can reduce the risk of commercial bank insolvency. In addition effective monitor can also reduce the risk of commercial bank insolvency.