The Effect Of Commercial Banks’ Interbank Business On Banking Stability Basing On Basel Agreement

In recent years, China’s commercial banks’interbank businesses booms rapidly, because it occupies less capital, brings high comprehensive income, has strong innovation ability and promotes competitive differentiation. It is favored by banks and has become one of the three major business segments of commercial banks, while the other two is corporate banking and personal financial business. Initially the interbank business is to transfer capital between different financial corporations to meet the needs of solving short-term liquidity. However, it becomes a tool used for regulatory arbitrage, engaging in "shadow lending" in the operation of pseudo-lending. Now, it has becomes a main direction of China’s shadow banking. During the process of its development, there may exist the problems of maturity mismatches, to avoid the regulation development, absence of standardization, and so on, hiding some risks. Therefore, this paper evaluates the influence of interbank businesses on the banking stability in our country, in order to promote the healthy development of China’s interbank business.At first, this paper combs the existing literature from three aspects:the stability of the banking system, the effect of shadow banking on the banking (financial) stability and the effect of interbank business on bank stability and proposes the perspective of this research. In this paper,11 indicators are selected from four aspects of profitability, asset quality, capital adequacy and liquidity, according to the data of 14 listed banks. Then the banking stability index is synthesized through the Factor Analysis. Then, we conduct the empirical research on the influence of interbank business on bank stability, and make further research of the joint-stock commercial banks.The empirical research shows that, the interbank business has a significant positive effect on the banking stability. Under the background of financing diversification and financial institutions marketization, the interbank business in essence is a kind of financial innovation. It promotes the development of China’s financial market and traditional banking business. Interbank business contributes to the amendment of China’s financial repression, provides diversified financing channels, promotes diversified development of China’s commercial banks and reduces its dependence on traditional deposit and loan business. Although there exits this or that kind of problems in practice, its positive effect on banking stability is the dominant. At the same time, the study also finds that, the RIDendent directors’ratio of the board has a significant positive effect on the stability of the banking system; in terms of ownership structure, too concentrated ownership has a negative impact on the stability of commercial banks; the faster economic growth is, the higher the stability of China’s commercial banks. In this study, to a certain extent Commercial bank deposit and loan spreads also shows a positive effect on the banking stability, especially for the joint-stock commercial banks, commercial bank lending and deposit interest rate has a significant influence on its stability. Contrary to expectations, the stock price of the commercial bank shows a negative effect on their stability, which may be related to the particularity of China’s stock market.Finally, in order to promote the development of interbank business, the relevant policy and suggestions are put forward from two aspects of macro regulation and micro main body, such as the relevant regulatory authorities should provide positive guidance for the development of interbank business, to make it standardized and transparent; commercial banks should seize to make innovation according to their own advantage, and promote the development of interbank business. Also the commercial banks should take advantage of the opportunity of the development of asset securitization and marketization of interest rate.