A Empirical Study On The Relation Of Noninterest Income And The Risk Of Banks

In the background of interest rate liberalization,financial disintermediation and the rapid development of Internet finance,the operating receipt what the Chinese commercial banks can earn from interest margin is decreasing.In order to sustain their operation,the commercial banks begin to search new operating receipt,at last they find noninterest business is a good measure for them to face the reforms in the financial market.At the beginning of 21 century,the noninterest business in the Chinese commercial banks starts to booming,what the noninterest business can bring to the risk of banks? This is what this paper want to answer.This paper starts with an introduction of other scholars’ research achievements about noninterest income and bank risk.The next contents are concerning about the developing process and the current situation of noninterest income in Chinese banks.Then we apply the portfolio theory,synergistic effect theory and diminishing marginal returns law to demonstrate the relationship between noninterest income and the risk of banks.Next we establish a panel threshold regression model between noninterest income and the risk of banks,the data which uses in the model comes from 83 Chinese commercial banks,and the time range is from 2007 to 2014.After the model,we get these conclusions:(1)There is a nonlinear relation between noninterest income and bank risk,when the ratio of noninterest income is below 26.8%,noninterest income can disperse risk,when the ratio is over that,bank risk will increase.(2)There also exist a threshold effect between fee and commission income and bank risk,that kind of effect goes with the other noninterest income.When the ratio of fee and commission income is short of 13%,that income has a risk increase effect,on the contrary,it follows a risk dispersion effect.With regard to the other noninterest income,when the ratio is under 24.3%,it has a risk dispersion effect,when the ratio is over that,it has a risk increase effect.(3)From the model,we can also find the size of the banks and the capital adequacy ratio have a negative relation with bank risk;but the relationship between the NPL and bank risk is positive.At last,combining the current situation and the empirical results,this paper put forward some specific suggestions on noninterest income business.