Non-interest Income Structure And Risks

In the context that China’ financial industry setup occurs to greatly changing,commercial bank whose development relies heavily on the interest income is usuallydifficult to carry out leapfrog development，more difficult to cope with the threat, includingthe entry of foreign bank and the heating competition of other non-bank financialinstitutions. Under the urgent requirements of looking for bank’ way out，commercial bankis getting increasingly attention on obtaining the non-interest income,striving to achievethe income structure’ optimal transformation by diversified performance and convert itssingle interest income type, which injects some fresh blood into commercial bank keepingup advantageous competition. However, commercial bank’ income structure whichgradually comes to propensity to non-interest income, would bring about where kinds ofrisk change happen for itself or the bank industry, it needs to further verify. An empiricalstudy based on data of53china commercial banks’ data between2003to2012finds thatthe risk of diversification is highly correlated with bank assets. The small scale ofcommercial bank assets, the greater risk expanding non-interest income will takeaccordingly. Furthermore, non-interest income is decomposed into investments tradingitem and commission item. It is shown that commission item is the main source of thenon-interest risk and the risk of investment trading income is not significant. Robustnesstest also supports that smaller commercial bank engaged in non-interest operating incomewould generate greater fluctuation effect. Finally, summarizing our study and puttingforward to some proposal about optimal non-interest income structure and risk-controlmechanism that suits Chinese reality.