Research On The Effect Of Non-interest Income On The Risk Of Commercial Banks In China

The problems of risk caused by non-interest income of commercial banks in China have been widely appreciated. In the background of interest rate liberalization and the rapid development of Internet banking, traditional business of commercial banks in China has taken a pounding, so it’s a trend of the future that commercial banks of China will strive to build non-interest business. As a result, how to restructure the income of bank considering the safety of banks has became a topic of common concern in theory sector and practice sector.Firstly, the paper systematically reviewed the relevant literature of the effects of non-interest income on the risk of commercial banks both abroad and at home, then formed a preliminary design of the paper, that was doing a research of effect of non-interest income on the risk of commercial banks that under different scale size. Secondly, the paper discussed the effect and conduction mechanism of risk caused by non-interest income. Thirdly, it analyzed the current situation of the development of non-interest business in China. At last the paper selected panel data of 65 Chinese commercial banks’from 2008 to 2013 and build a panel threshold regression model to do a empirical research on the effect of non-interest income on the risk of commercial banks in China. Conclusions of this paper were that:firstly, there was a nonlinear relationship between non-interest income and risk of commercial banks in China. Taking asset size as threshold, there were two thresholds that were 851,708.83 million and 6,439,748.21milion, according to which divided the sample of banks into three categories: large banks, medium-sized banks and small; Secondly, for large banks, expansion of non-interest business can effectively reduce the risk of banks; for medium-sized banks and small banks, expansion of non-interest business will increase the risk of banks, while there was a relatively less negative effect of medium-sized banks compared with small banks.At last, combining the actual situation of the development of commercial banks in China and the empirical results, the paper put forward new proposals on the development of the development of non-interest business for banks with different scales, hoping that will be a guiding significance for commercial banks in China to safely operate and optimize business structure.There are a few innovations in this paper:firstly used threshold regression model to do research on the relationship between non-interest business and risk of commercial banks, while got a more objective and strong way for the classification of the bans by estimating and hypothesizing the thresholds for bank’s size with rigorous statistical inference methods. As a result, the conclusions and policy recommendations were more accurate and targeted; secondly, put portfolio theory and synergy theory in use to demonstration the formation and conduction mechanism of risk caused by non-interest income, and provides a theoretical basis for the research hypothesis and conclusion to explain; thirdly, compared with previous research that only used the proportion of non-interest income to measure the extend of non-interest business, the paper chose entropy to make it more accurate.