The Effect Of Deposit Insurance System On Profitability Of China's Listed Commercial Banks

With the development of economy and the progress of science and technology,the financial environment of our country has undergone great changes,facing the new challenges such as the deepening of interest rate marketization reform,the loose financial admittance policy and the rapid development of Internet finance,in order to deal with the changes of financial environment and maintain the stability of financial market,China should set up and implement deposit insurance system as soon as possible.Deposit insurance system is established by national organization and forces financial institutions to part in,financial institutions can be compensated by fund when they are bankruptcy,it as a kind of safeguard mechanism plays a unique role in financial environment.Our country studies the deposit insurance system mainly by learning the design of American and experience from other countries,and tries to establish a system with the characteristics of China's development.The deposit insurance regulation clearly stipulates the design problems of the system such as the rate,which is implemented in our country with a ceiling protection of 500,000 CNY and different rates.The implementation of the deposit insurance system will safeguard the interests of savers,reduce the probability of bankruptcy,provide a more fair development environment for the different financial institutions,help stabilize the financial order and promote the healthy development of society and economy.However,its implementation would increase the cost of commercial bank,it can cause the risk of moral hazard and adverse selection once the supervision does not examine.So this paper studies the influence of the deposit insurance system on the profitability of commercial banks on behalf of the listed commercial banks in China,and studies the profit changes of different commercial banks under the deposit insurance system to enrich the research about the profitability of commercial banks and provide support for the further implementation of the deposit insurance system.By combing and summarizing the development and present situation of the deposit insurance system in foreign countries,combining with the design of deposit insurance system in our country,this paper analyzes the effect of deposit insurance system on the commercial bank.Then the paper and uses the panel data to analyze from the internal and external factors that affect the profitability of commercial banks by selecting 26 listed commercial Banks in China for six years of annual data from 2011 to 2016.The paper makes a comparative analysis of the differences between different banks and puts forward suggestions on the development of the non-state-owned banks.The results show that the implementation of the deposit insurance system can reduce the profitability of commercial Banks.Through comparative the influence degree on different banks' profitability,we could find that the profitability of Non-state-owned banks is lower.About other factors affecting commercial bank profitability,we find factors such as capital adequacy ratio,intermediate business income accounted for,the net interest margin,economic growth are positive effect,but the cost income ratio,non-performing loan ratio and the consumer price index are negative effects.Besides,asset size,liquidity and loan than have the different perform between state-owned Banks and non-state bank.Analyzing the gap between state-owned and non-state-owned Banks,paper thinks non-state-owned banks can improve their profitability by enhancing their risk-resisting ability,expanding their source of business and diversifying their precision operations.Deposit insurance system has not been implemented for a long time in China and commercial Banks have not adapted to its new changes,so the current effect is negative.But with the improvement of the system and the strengthening of supervision,the financial environment will be significantly improved,financial exit mechanism will also be legalized,then commercial Banks will benefit from the system.We predict the effect will gradually change to positive effect in future,of course it also need time to test and verify.