An Empirical Study Of Income Diversification And Risk Of Bank

In the 1970s, sharp changes in the international financial environment happened, promoting the diversification of western commercial bank, mainly the large-scale development of non-interest business. But due to historical and institutional reasons, China’s commercial banks still rely heavily on spreads of net interest income and non-interest business, and the consciousness of non-interest business development is not strong. In recent years, there are many changes which are not benificial to the traditional loan business development in the financial industry of China. At the same time, the research on the theory basis of this business model transformation is also carried out in the academic field. There are many research on the effect of diversified income on earnings in the commercial bank. But there are very few studies in the effect of bank income diversification on bank risk, Few study are carried out to analyze the diversity of bank’s income in the perspective of risk management.In this background, this article first elaborated relevant theoretical knowledge about the diversified income, bank risk management and research results at home and abroad. In the empirical part, diversified income’s influence on the risk are analyzed firstly from the aspects of theory. On this basis regression model are established, using 14 commercial banks in China during 2008 to 2012,totally 20 quarterly data. And we subdivided diversified income into two types to establish model respectively in-depth, using two samples of state-owned and non-state-owned respectively to empirically examine the relationship between the income diversity and the bank’s risk. The empirical results show that in recent years, income diversification has a beneficial effect on bank business. It can reduce the risk of bank to a certain extent. Combined with the empirical results, the article puts forward following suggestions from the angle of bank risk management:steadily promoting diversified management, so as to reduce commercial bank operation risk; focusing on their own in the process of diversity management scale and the historical data and being realistic in expansion; Attention should be paid to control the proportion of non-interest income; Different types of banks should develop different types of non-interest income according to their own characteristics.