The Impact Of Economic Policy Uncertainty On The Vulnerability Of Commercial Banks

In recent years,in China’s macro economy enters the new normal,a trade war with China,the aim of carbon neutral and COVID-19 outbreaks,against the background of international events,such as economic growth encountered big ups and downs,the stock market volatility,are hard to keep stable development of capital market,the government in order to the normal development of economy and new laws and regulations,Although it can make the resources in the market get more effective allocation,it also make it difficult for market subjects to predict the future economic policy trend.As one of the important components of China’s economy,it becomes very important to study whether and how frequent changes and adjustments of economic policies will adversely affect the normal operation of the banking industry.The first chapter mainly expounds the research background and significance,and introduces the innovation and shortcomings of this paper based on many literatures.After that,the second chapter sorted out the important literature on economic policy uncertainty and vulnerability of commercial banks at home and abroad,sorted out the research status of relevant topics at home and abroad and the different conclusions drawn by many scholars,and briefly reviewed the existing research status at home and abroad.Then in the third chapter to study the implications of the variables and measurement methods are introduced,and based on the hypothesis of financial fragility theory,real option theory,asymmetric information theory and the theory of the four portfolio theory analyzes the frequent adjustment in economic policy during the bank vulnerability level why change,then in the fourth chapter according to the theoretical basis for related research hypothesis is put forward.In chapter 5,the financial data from the first quarter of 2008 to the third quarter of 2021 of 27 listed commercial banks in China are used to select five vulnerability indicators and then the entropy method is used to calculate the comprehensive value of the vulnerability level of commercial banks.Then,the relationship between economic policy uncertainty and bank vulnerability level and the channel effect of the relationship are empirically analyzed.Then,the heterogeneity,robustness and endogeneity tests are completed by grouping the samples,replacing explained variables and delaying all independent variables for one period.The test results are the same as the main part.Finally,in the sixth chapter,on the basis of the conclusions drawn from the previous analysis,countermeasures and suggestions for banks in the face of economic policy fluctuations are proposed.The main conclusions of this paper are as follows :(1)the vulnerability level of commercial banks will increase significantly with the increase of economic policy uncertainty.During the period of economic turbulence,the deterioration of the external environment leads to the limited development of enterprises,while the banks’ risk identification ability of enterprises decreases,and other reasons lead to the increase of banks’ vulnerability level.(2)The diversification level of income structure is one of the influencing channels.During the frequent adjustment in economic policy Banks will intensify to review intends to provide credit enterprise,the tightening of lending from the supply end,at the same time due to the enterprise the financing demand on demand,resulting in a decline in interest income level,in order to expand the source of income and profit space,the bank in the case of insufficient regulation regardless of risk across regulatory red line,blindly expand non-interest business,Diversifying banks’ income mix not only wastes resources but also poses hidden dangers.(3)Large state-owned banks are the most significant in the relationship between economic policy uncertainty and bank vulnerability.In the face of frequent changes in economic policies,state-owned banks tend to pursue high premium returns due to the hidden guarantee of the government,which can realize risk transfer,leading to increased vulnerability level.In order to prevent commercial banks from increasing too much vulnerability due to frequent changes in economic policies,this paper considers that both government departments and commercial banks should be considered.It is necessary not only to maintain the consistency of important economic policies,increase the transparency and predictability of economic policies,but also to actively improve their ability to resist shocks to various risks in the market,and develop non-interest income businesses in a reasonable and steady manner under supervision.