Research On The Determinants Of Net Interest Margin In China’s Commercial Banking System

Net Interest Margin (NIM) is generated as a commercial bank provides the lending rates higher than the deposit interest rate, which is defined as the ratio of the specific bank net interest income to average interest-earning assets. Net interest spread is the main source of bank profits, but also it’s a measure of banks as financial intermediaries play an important indicator of the efficiency of intermediation. Therefore, the bank net interest margin reflects not only the operations efficiency, but also reflects the bank as the main indirect financing of social intermediary transaction costs and intermediary efficiency. Based on Ho&Saunders dealer model and Maudos&Guevara extended model, the paper analyzes China interest rate spreads in the regulatory context determinant from the bank’s own factors, industry conditions and macro factors and selected78commercial banks from2005to2012years (unbalanced panel data) which covers large commercial banks, joint-stock commercial, local city commercial banks and rural commercial banks. I use the random effects model to analyzes the factors of China’s commercial banks net interest margin, by selecting the relevant indicators, and analyze the different effects of different types of development banks and the financial crisis on the net interest margin determinants generated.The chapter is structured as follows:Chapter1is an introduction to the research background, giving a detailed description of the part of the significance of the topic, followed by a broad overview of the research framework, and then concludes innovation of this paper.Chapter2is mainly literature review. This part introduces current research abroad relatively popular in the two kinds of models and their development and innovation, and then summarizes the domestic research of two aspects. Finally, it has carried on the simple review of literature.Chapter3analyzes the development status of China’s commercial banks, as well as international comparison on the determinants of spread. Based Dealer model and combined with the actual situation in China, this part analyzes the factors of net interest margin on China’s commercial banks and proposes theoretical assumptions.Chapter4is the main core of this article, namely the use of empirical measurement data and testing the bank’s net interest margin determinants; through the full sample regression, analysis of China’s commercial banks net interest margin determinants and impact.Chapter5then further extend our analysis of the differences between the different types of commercial banks net interest margin factors, as well as the differences before and after the financial crisis, commercial banks net interest margin influencing factors.Chapter6is a comprehensive analysis of the full text on this article, and summarizes the research and then makes policy recommendations.This article has some innovations, mainly in the following areas:(1) In the empirical methods, unlike most domestic research by using the fixed effects model, this paper uses the modified random effects model to study the determinates of net interest margin on China’s commercial bank. From a statistical point of view, selecting the random effect model can avoid the loss of freedom. From the point of economic significance, this paper argues that each bank has its respective features (such as, cultural differences, etc.), namely the individual effect, and time effect and exchange rate fluctuations are autocorrelation. Comprehensive analysis and statistical test, this paper is a random effects model to study the determinants of net interest margin.(2) The object of study is more comprehensive and the sources of data is more abundant. Research of this paper covers four types of bank, including the state-owned Banks, joint-stock Banks, city firms and rural banks. The selection of object of study is more comprehensive, and this paper studies the different types of the determinants of bank net interest margin. Previous studies, by contrast, there are few paper which chooses the city firm and rural commercial bank, especially the rural commercial bank. Domestic scholars on the data source, ever use the listed bank, or a handful of private bank data, dealing with the data missing part by the historical data simulation to reach the balanced panel data directly. While using bankscope which is comparatively perfect database, this paper selects the78 commercial Banks of raw data from2005to2012years, which is the unbalanced panel data, providing a more perfect and more real sample data for the research to make up for the deficiency of the domestic in this respect.(3) Researching the changes of determinates of net interest margin on China’s commercial bank before and after the2008financial crisis contributes to conduct effective crisis response measures in the future. Previous literature mainly analyze differences before and after the reform of interest rate in our country, but few deep research on the impact of the global financial crisis in2008on bank spreads. Because of this, this paper takes the2008financial crisis as the cut-off point, emphatically analyzed our country commercial bank net interest margin before and after the crisis decision factors changes, the related research conclusion will be beneficial to our country commercial bank in the future when we meet the sudden large macroeconomic fluctuations, it is better able to take measures to deal with systemic risk effectively.