Study On The Impact Of Financial Disintermediation On The Soundness Of Commercial Banks

With the deepening of China’s financial reform and the development of China’s financial market, financial disintermediation phenomenon is emerging and deepening in China gradually. From the view of past experience, the main reason for financial disintermediation is that many funds are allocated by other financial institutions and capital market directly, bypassing commercial banks. The occurrence and development of financial disintermediation will inevitably have direct or indirect impacts on commercial banks. Then, can the impacts shock the soundness of commercial banks? If they have shocked, how much is the shock? How can the commercial banks cope with the shock? All of these important issues are not only urgent to be resolved, but also the main contents of this paper.Firstly, this paper systematically describes the generated motivation of financial disintermediation, based on the theory of financial intermediation. And then, this paper also analyzes the re-intermediation effect, based on the re-intermediation theory. Secondly, this paper conducts a comprehensive analysis on the present situation of financial disintermediation and commercial banks’soundness in China. Thirdly, this paper qualitatively analyzes the positive and negative impacts of financial disintermediation on the soundness of commercial banks in China. Finally, this paper constructs the indicators which can measure the financial disintermediation and soundness of commercial banks in China. With the balanced panel data of15listed banks in China, this paper empirically tests the impact of financial disintermediation on the soundness of commercial banks.The study shows that financial disintermediation, on the one hand, makes the stability of fund source reduce, fund application face challenge, the profitability decline and risk management more difficult, on the other hand, benefits optimizing business structure and enhancing the cooperation with non-bank financial institutions. From the view of both directions of asset and liability in commercial banks, re-intermediation effect not only resolves the negative impact of asset disintermediation on the soundness of commercial banks, but also raises the soundness of commercial banks to some degree. However, re-intermediation effect can’t resolve the negative impact of liability disintermediation on the soundness of commercial banks fully. Overall, liability disintermediation discourages the soundness of commercial banks. Therefore, commercial banks should guide and use re-intermediation effect reasonably. Besides, they also should pay high attention to the negative impact of financial disintermediation on the commercial banks’soundness, and expand the fund source channel actively, adjust asset structure, develop middleman business vigorously and perfect risk management system, in order to raise their soundness.