Analysis Of The Impact Of Liquidity Risk Of Listed Commercial Banks On Their Profitability

Banking as the essence of modern finance,stability of the banking industry has great effect on finance system.At present,banking industry faces varieties of problems and challenges during its development.Such as,finance globalization makes our environment more and more complex and changeable;Interest rate liberalization causes less interest gap between deposit and loan of commercial bank;rapid development of internet banking occupies money resource;national financial policies like Financial poverty alleviation bring great pressure on profit promotion for commercial bank.Under such background,whether commercial bank can handle good.balance between liquidity and profitability has great deal of importance on development of commercial banking system as well as the real economy.Liquidity of commercial Bank is closely related not only to asset but also to its Off-Balance Sheet item.Interest gap between deposit and loan of commercial banks accounts for the highest proportion of its profit structure.Quality of loan and its interest income are important factors influencing commercial bank's profitability,which is added fresh energy by development of interbank business.Liquidity risk is highly paid attention after financial crisis in 2008.Under such circumstance,study of what effect liquidity risk has on profitability and mutual influence mechanism between them has great meanings.This essay studies by actual case what effect liquidity risk has on profitability of commercial bank by reviewing previous documents and papers about it.We studied figures from year 2006 to 2015 of public commercial banks,setting liquidity creation as indication of commercial bank's liquidity level.We considered both on balance sheet item and off balance sheet item,both of which reflect liquidity risk of commercial bank.We also set the academically used indicator ROA to measure profitability.All indicate that liquidity risk of commercial bank has negative effect on profitability.On this basis and from perspective of commercial bank asset,there are two points of influence mechanism which liquidity risk has on profitability.On one hand,credit risk affects profitability.Liquidity risk causes credit risk increase,which leads to profitability decrease consequently.On the other hand,interbank asset business affects profitability.Liquidity risk increase causes interbank asset quality decrease,leading to lower profitability.Accordingly,this essay offers certain suggestions about the need to put emphasis on comprehensive control of liquidity risk and credit risk management,as well as strong supervision upon development of interbank business,Business development is the core of commercial bank growth.At the same time,risk control is the essence of business development.