Interest Rate Liberalization,Bank Size And Risk Taking

The interest rate marketization is an important move in our country's economic reform,which has a far-reaching influence in China's economic growth and economic structure optimization.But international experiences show that increasing fierce banking competition after the interest rate marketization will exerts influence on finance especially on banking to some extent.Since the narrowing net interest margin,more fluctuating interest rate volatility and more fierce completion will all be a factor to commercial bank's operation model,it needs carefully thinking how to control the risk of commercial banks under the interest rate marketization.On the other side,the continuous strengthening of regulatory requirements and the reform of interest rate liberalization have an important impact on the traditional business model of China's over-reliance on credit expansion.Although the majority of experts and scholars believe that economies of scale exist in banking,the benefits of reducing the marginal cost of risk management brought about by the expansion of the scale tend to induce commercial banks to take on greater risks,such as taking advantage of the low risk cost to reduce the quality of the assets,which makes the commercial banks face more risks.So it is necessary to study the scale and risk of commercial banks.This paper mainly studies the relationship among interest rate liberalization,bank size and bank risk taking in our country's listed commercial banks.Based on theories of bank risk taking,interest rate marketization and bank scale,this paper briefly analyzes the situation of China's listed commercial banks under the background of interest rate liberalization.Firstly,it analyzes the process of interest rate marketization in our country,and then makes a descriptive analysis on the scale and performance of the bank.The empirical research use Expected Default Frequency(EDF)as the measure of bank risk taking and try to explore the relationship among interest rate liberalization,bank size and bank risk taking in our country's listed commercial banks during 2006 to 2016.The empirical results show that the bank takes higher risk if it has a relatively smaller size,while bank risk taking becomes lower as the intensity of banking competition,especially which in joint-stock banks.Further research shows that deposit-to-loan spreads has been narrowed under the background of interest liberalization which would reduce the negative effect of bank's size on its risk taking.