Research On The Influence Of Financial Derivatives On The Profitability Of Commercial Banks

The rational use of financial derivatives can enable commercial banks to achieve the purpose of preventing interest rate risk and exchange rate risk by their hedging,thereby reducing the uncertainty of profits.As a new financial product,financial derivatives emerged in the 1990s and developed rapidly.However,the outbreak of the 2008 financial turmoil brought about a global economic downturn,and the international financial market was hit hard,and financial derivatives were the main culprit.The rise and development of financial derivatives in China is relatively lagging behind,with the characteristics of small transaction scale and few types of transactions,but its development has shown great vitality.As financial derivatives gradually become the focus of the international community,the analysis of the impact of the financial derivatives business carried out by commercial banks in China on their profitability has also attracted widespread attention from domestic scholars.Investigating the development status and development characteristics of China's financial derivatives business,and studying its impact on the profitability of commercial banks have important theoretical significance and urgent practical needs.Based on the related concepts and theories,this paper first describes the status quo and characteristics of the financial derivatives business carried out by commercial banks in China and the existing problems.Then based on the analysis of the impact mechanism of financial derivatives business on the profitability of commercial banks,based on the financial data of 14 listed commercial banks in China from 2011.06-2017.12,based on the theoretical analysis,the panel data model is constructed.Empirically examine the impact of the development of financial derivatives business on the profitability of commercial banks in China.Finally,the paper proposes corresponding policy optimization suggestions for the current problems of financial derivatives business in China affecting the profitability of commercial banks.Based on the above analysis,this paper mainly draws the following conclusions:firstly,from 2011 to 2017,China's state-owned banks have the largest scale of financial derivatives business,followed by joint-stock commercial banks,and urban commercial banks are generally low.The amount of financial derivatives contracts of various commercial banks shows a growing trend,although fluctuations occur in some years.However,the overall transaction size has steadily increased.Secondly,from the perspective of trading varieties,in recent years,the most widely used financial derivatives in China's commercial banks are foreign exchange derivatives and interest rate derivatives.The financial derivatives trading business is relatively simple,involving only about 10 types,far behind the developed countries.China's relatively single type of financial derivatives trading simply cannot meet the growing market demand of investors and commercial banks in the transaction process.Thirdly,by constructing an empirical model of the impact of financial derivatives business on the profitability of China?s commercial banks,the results show that the development of financial derivatives business will not improve the profitability of commercial banks,and the two have a negative correlation,that is,the scale of financial derivatives.The expansion has brought about a decline in the profitability of commercial banks.This may be because the external environment of China's financial derivatives market and the imperfections in the internal construction and management of banks have limited the function of financial derivatives.In summary,we should promote the use and good operation of financial derivatives from the aspects of improving the external market environment of financial derivatives business and optimizing the internal construction and management of commercial banks,thereby improving the profitability of commercial banks in China.