Research On The Transformation Of Profit Model Of Small And Medium Banks Under The Background Of Financial Deleveraging

Commercial Banks in China has been restricted to the profit margin dominated profit model for a long time.The banking industry has obvious internal homogenization and fierce competition.Due to the limited storage capacity at the debt end and the asset-backed investment capability,small and medium banks have developed of an profit model for obtaining funds by issuing a certificate of deposit and investing interbank deposit certificate,interbank financial product or outgoing investment in order to gain a profit.In recent years,the growth rate of China’s banking industry is significantly higher than that of the real economy.This shows that the development of banking industry has some deviations from the real economy,which is closely related to the profit mode developed by commercial banks in recent years.Especially small and medium-sized banks,from the liabilities side,the interbank deposit on the circulation of high proportion,the asset side,the proportion of small and medium banks claim to financial institutions increased rapidly and exceeded the percentage of claims on non financial institutions.It can be seen in recent years that small and medium-sized banks have more use of this profit model.However,this profit model makes the capital "out of reality",increasing the financing cost of the real economy and raising the leverage of the financial system.Secondly,this model depends on loose monetary policy and if the central bank raises the cost of capital,the profit space will disappear.What’s more,it has a high risk of the financial system in the operation of financial institutions:the rolling process by using the maturity mismatch approach,increase the liquidity risk.In addition,the chain mechanism is complicated,financial products staggered.So there is a high degree of cross contagion.Therefore,the profit model does not have the sustainability of profit.Relevant regulatory agencies began to implement a series of financial deleveraging policies aiming at the profit mode from 2016.The purpose is to guide the financial industry to abandon the profit mode and return to the real economy.Small and medium banks have been greatly affected by the financial deleveraging policy,because they have operated the profit model too much.The size of small and medium bank deposit certificates and finathe growth rate of assets and the growth of business income slowed significantly in ncial products decreased significantly,and 2017.Small and medium-sized banks are facing such a great impact,which is rooted in the fact that small and medium-sized banks are dependent on the profit margin dominated profit mode,with limited profitability and lack of competitiveness.Therefore they are attracted by this profit mode in order to expand their assets and profits.To sum up,the fundamental change in the current situation of development lies in the transformation of the profit model.Combined with the transformation of China Merchants Bank’s profit model,China Merchants Bank gradually changed its profit margin model in the process of"first transformation" and "second transformation".Combining with the transition case of China Merchants Bank,this paper puts forward a reasonable suggestion for the transformation of the profit model of small and medium commercial banks.Starting from the macroscopic aspect,first of all,small and medium banks need to return to the initial heart of serving the real economy because the real economy is the foundation of the development of the banking industry.At the same time small and medium banks need to improve the sound operation consciousness,strengthen the prevention of the profit model and seek development.In addition,in the choice of strategic direction,small and medium banks need a forward-looking strategic vision to build the path of development of differential strategy.From a micro perspective,small and medium-sized banks should optimize the traditional credit income structure,and enhance the proportion of non-interest income in order to improve the income structure.In this step,a new profit growth point can be found in retail business,asset management,investment banking and other characteristics.Finally,small and medium-sized banks must continuously improve competitiveness through continuous innovation and developing technology finance.In the process of financial innovation,we should pay attention to the realization of customer demand,improve the training system of talents and improve the risk management and control mechanism.