The Research On Sustainability Of "High Profits" For China’s Banks

The bank’s " high profits" had become the focus of public attention in2011. Manyof us called the high profits of the bank as "profiteering". in my opinion,“profiteering” is that the behavior of operators and producers use improper means toacquire more than a reasonable profit margin. The specific definition of profiteering bythe right to institutions (the price department, court, etc.) according to the same goods,the same grade in the same area, identified the same time the relative price level.Spread income of the banking sector, the main source of profits is provided by theState deposit and lending rates, fee and commission income is derived from specificbusiness, they don’t use unfair ways. So, for the banking industry in recent years, Theearnings results elaborated more appropriate to use "high profit”. Since the reform of2003, banking performance is growing year by year, and has achieved gratifyingresults. Even under the influence of the economic crisis of the financial crisis and theEuropean debt crisis in recent years, china’s real economy slows down, somecompanies faced bankruptcy. But banking profits not only substantially higher than theindustry, even higher than that of the oil tobacco and real estate.It is based on the background to engage in intensive study. Through the analysis ofbanks’ annual financial report, we can see that it’s due to the limited exposure of China’s bankingsector, china mainly rely on domestic financing, and has a large net international asset position,so banks by foreign financial crisis is limited. In recent years, Its profits mainly due to the increasein fee and commission income, on the other hand the high spread income. Increase in fee andcommission income mainly from the banking sector continue to business innovation, the bank hasdeveloped a variety of financial services, electronic banking and new business, which charge a fee,does exist in these innovative business less "pseudo-innovation" phenomenon, and planted theseeds of the risk of giving this source of profits. Furthermore, China’s banking industry has alwaysmaintained a stable spread income derived from interest rates has not been market-oriented, Chinahas basically met the interest rate market conditions, interest rate market is imperative, when theprofits of the banking sector will be affected. Is not difficult to see that each bank more or less in the banking supervision indicators have begun to gradually deviate from the regulatory standards ofbank risk has slowly emerged from the financial reports. The Bank continues to maintain thecurrent business model and risk control system operation continues, this "high profit" status willeventually disappear. The risk is associated with high profit, from the perspective of bankrisk controlling, We analysis the banks operating status,future trends and thebackground of Bank profiteering, phenomena, causes and windfall sources of China’scommercial banks. Through collecting data, I use regression analysis of empiricalmethods to test bank profitability index and risk index correlation exists between the"high profits" and then judge whether the sustainable. Finally, I find some measures tosolve the problem of" profiteering", improve risk-controlled system of bank and putforward some suggestions.