Research On The Impact Of Market Competition On The Liquidity Creation Of China's Commercial Banks

As a core part of a country's financial system,the stability of banking industry is closely related to the steady and healthy development of a country's economy.According to the existing theory of financial intermediation,commercial banks play two types of functions: liquidity creation and transformation of risk in the economy.Bank liquidity creation means that banks create liquidity in the process of absorbing liquidity liabilities and disbursing non-current assets.In this process,commercial banks liquidity will also change,can lead to liquidity term mismatch,increased its liquidity risk even the phenomenon of bank runs.The 2007 financial crisis,Basel Ⅲintroduced new regulatory targets,and the "Money shortage" incident,and then to the Banking Regulatory Commission issued the "commercial banks liquidity risk management measures",bank liquidity management caused widespread concern..In this series of backgrounds,Chinese scholars mainly focus on the existing research on liquidity risk measurement and prevention of commercial banks.There are not many studies on the measurement of fluidity creation and the influencing factors.Therefore,it is particularly useful to analyze the liquidity creation of commercial banks in China.With the participation of foreign banks,the reform of property rights of state-owned banks,many banks listed and the entry of private banks,and the deepening of interest rate marketization,the market competition pattern has changed greatly.Under the background of the increasingly globalized economy and the survival and development of banks all over the world,the competition in the banking market becomes more and more fierce.It is particularly important to study the relationship between market competition and the liquidity creation of commercial banks.This article refers to the measure of liquidity creation index proposed by Berger and Bowman(2009).It has been properly amended to make it more suitable for the actual situation in China,and measured the liquidity creation of 54 commercial banks in China.The sample period selected 2007-2016.The empirical measurement results show that the total amount of liquidity creation(absolute value)of commercial banks in China is increasing year by year.The contribution of different types of banks to total liquidity creation is different.Moreover,the growth of liquidity of the other two types of banks is faster than that of state-owned banks.As far as liquidity creation(relative value)is concerned,the liquidity creation level of commercial banks in China is increasing first and then decreasing,taking 2010 as the demarcation line.And the market competition in this paper is measured by banking concentration degree and competition degree The concentration degree is expressed by the HHI index,and the competition degree is expressed by lerner Index.The measurement results show that the HHI index is decreasing,indicating that the market concentration is decreasing.The lerner index first increased and then decreased,indicating that the market power of China's commercial banks first increased and then decreased,which means that the degree of competition is rising in the fluctuation.Based on the effective measure of market competition and liquidity creation of China's commercial bank,the paper using R software and using the system generalized moment estimation(GMM)method,empirical analysis the influence of market competition on the liquidity creation of China's commercial banks by using the dynamic unbalanced panel data of 54 Commercial Banks in China from2007 to 2016.Empirical research shows that :(1)the smaller the market concentration,the greater the competition,and the level of liquidity creation will decline.Market competition will have an inhibitory effect on the liquidity creation ability of commercial banks,and they will have significant influence on commercial banks with all samples and different attributes.This shows that there are “fragile channels” in China's commercial banks;(2)the coefficient and significance of market concentration HHI is higher than that of the competition degree lerner,which may be related to China's banking industry not completely competitive market;(3)the market competition coefficient of urban commercial banks is obviously larger than that the other two types of banks,which means that the market competition has more restraining effect on the liquidity creation ability of urban commercial banks than the other two types,and the city commercial banks are more sensitive.Finally,It provides a new perspective for the commercial banks and regulatory authorities in China to regulate the level of liquidity creation,and provides some suggestions for the reform of the banking market in China.At present,China's commercial banks have strong convergence.Banks need differentiated development,such as market segmentation and differentiated services,to increase profitability.Commercial banks in the process of operation,according to changes in the macroeconomic environment,by adjusting their asset allocation,reasonable anticipation of liquidity,in order to maintain the balance between the security of bank assets,profitability and liquidity,The regulatory authorities,should guide the bank market competition keep in reasonable level,moderate competition guarantee bank liquidity creation level,improve the ability of commercial Banks to service the real economy.The banking supervision of liquidity creation effects vary due to bank heterogeneity,recommendations for different types of banks make different regulatory standards,the implementation of targeted regulatory.Finally,in the process of China's banking reform,the differences of different types and sizes of Banks are faced,and the differentiation strategy is adopted.Urban commercial Banks with strong regional and local protectionism should be more cautious in opening up market competition,and can slow down properly.