Study On The Vulnerability Of China’s State-owned Commercial Banks

As the global economic and financial integration is progressing faster, our financial system is facing greater opportunity and challenge. The speeding up of opening financial market, the entry of foreign banks and the deregulation of capital all require the stable operation of our banking industry.State-owned commercial banks have surpassed joint-stock commercial banks, city commercial banks and foreign banks in the aspects of the scale of loans and deposits, branch offices networks, and business lines. Due to the problems heritated from the planned economy, state-owned commercial banks have accumulated quite a lot of non-performing loans. With the IPOs of state-owned commercial banks, the adequacy rate of capital and NPLs have been improved a lot. Meanwhile, the entry of strategic investors into the banks has helped improve their management and self-control systems. However, commercial banks are intrinsicly fragile due to their business characteristic of high debts. The healthiness of macro economy, the tightness or ease of central banks’monetary policies, and even the economic conditions of other relative economies all influence the commercial banks in China. Moreover, the regulators’efficiency also has something to do with the vulnerability of commercial banks. Also, Commercial banks are the core of a country’s financial system. The stability of banking system assures the economy’s healthy development, while the instability of banking system would cause serious economic damages. It is crucial to our economic development to own a healthy, stable and competitive commercial banking system. Thus, researching on the vulnerability of commercial banking system means a lot to avoid banking crisis, assure economic development.This paper first analyzes the causes of the vulnerability of our commercial banking system. Then it uses Johansen Co-integration test to examine the1992-2011financial and macro-economy data of the five state-owned commercial banks. Based on the test, it lists the factors that influence the vulnerability of state-owned commercial banks. The empirical results show that changes in macroeconomic factors and micro-financial factors will affect the vulnerability of commercial banks. The macroeconomic factors affect the vulnerability of banks more significantly, mainly in the debt rate, monetary policy and M2proportion of gross domestic product. At last, it offers policy suggestions on bettering the marco-economic environment, accelerating the transition of commercial banks’management system and improving the regulation efficiency.