The Empirical Analysis Of Influencing Factors Of The Interest Margin In China’s Commercial Banking System

It has been three years since the formal completion of the Interest Rate Liberalization Reform,and the impact of the reform has been deepening and gradually finalizing.In this context,the factors affecting the interest margin of China’s commercial banks will also be different from the past.Based on the Trader Model put forward by Ho & Saunders,this paper deduced the formula and introduces the basic factors affecting the interest rate spread of China’s commercial Banks.And meanwhile,based on China’s special national conditions,additional variables reflecting China’s macroeconomic situation and policy orientation were introduced.Among them,the "Index of Interest Rate Liberalization" variable was innovatively compiled to measure the impact of interest rate liberalization reform on China’s banking industry from the two dimensions: one was the interest rate determination dimension,the other was the interest rate floating range dimension.This new variable measured the impact of Interest Rate Liberalization Reform on China’s banking industry from shallow to deep and step by step.This paper selected the panel data of 27 listed Banks in China from 2008 to 2017,and then established multiple linear regression models to conduct overall regression and sub-bank category regression.The final empirical results showed that operation cost,risk aversion degree,deposit and loan scale,interest rate risk and benchmark interest margin had positive influence on the interest margin of China’s commercial banks;credit risk,market competition structure,economic growth and interest rate marketization index have negative influence on the interest margin.Different types of banks have different sensitivities to these factors,the influence of credit risk,market competition structure and benchmark interest rate on large state-owned banks were not significant;the influence of risk aversion degree,the deposit and loan scale and the credit risk on mediumsized joint-stock banks were not significant;the influence of interest rate risk and market competition structure on city commercial banks were not significant;while the three variables including operating cost,economic growth and interest rate marketization index all had significant impact on three types of banks.All there reflected the differences among these banks.Based on the empirical results,this paper put forward some feasible suggestions respectively from commercial banks level,industry supervision level and national macro level,providing a solid theoretical basis for China’s commercial banks to survive and thrive the painful period of the reform.