Research On The Impact Of Interest Rate Marketization On The Profitability Of Commercial Banks

In recent years,the market-oriented reform of interest rates has had many impacts on the operation and management activities of China’s commercial banks,the biggest impact of which is the narrowing of the deposit and loan spread,and the traditional business model with the deposit and loan interest rate spread as the main source of profit has been inevitably impacted.In the process of interest rate liberalization,the concentration of the banking industry continues to decline,and the competition between banks becomes fierce,which will also have an effect on the profitability of banks,making the sustainable growth of bank profits face great challenges.This paper takes interest rate marketization as the background,discusses the direction and degree of impact of interest rate marketization on the profitability of commercial banks,classifies and studies according to bank ownership,region and bank scale,and further studies the impact of the intermediary effect of commercial banks’ market structure on interest rate marketization and bank profitability,hoping to provide some reference for the path selection of commercial banks’ profit model in China.This paper will introduce the measurement of the reform process of interest rate marketization and the measurement of the market structure of the banking industry.Firstly,the interest rate market-oriented reform of the money market,bond market,deposit and loan market and foreign currency market is sorted out,and four primary interest rate market-oriented measurement indicators and twelve secondary indicators are constructed,and the value is assigned and weighted to obtain the interest rate market-oriented index.Secondly,the measurement of the market structure of the banking industry is introduced,and the market share,CR4 and CR8 representing the industry concentration and the Herfindhal index are used to quantitatively describe the market structure of China’s banking industry,so as to obtain the explanatory variable interest rate marketization index(IRL)and the intermediary variables CR4,CR8 and Herfindhal index(HHl).This paper specifically selects 6 large state-owned commercial banks,10 joint-stock commercial banks,3 1 urban commercial banks,16 rural commercial banks,3 village and town banks,and 2 rural credit cooperatives in China,a total of 68 commercial banks as research objects,takes the relevant data from 2009 to 2021 as samples,conducts benchmark regression on the whole sample,and classifies and regresses according to bank ownership,region and scale,and takes the interest rate market-oriented index(IRL)constructed in this paper as the core explanatory variable.This paper analyzes its specific impact on the representative profitability index of return on total assets(ROA)of commercial banks,takes CR4,CR8 and Herfindhal Index(HHI)as intermediary variables,studies the intermediary effect of the market structure of the banking industry,and finally concludes based on the empirical research results:the interest rate marketization reform promotes the improvement of the profitability level of commercial banks.The effect of interest rate marketization on the profitability of banks has heterogeneity of ownership,region and scale;Interest rate marketization reduces the market concentration of the banking industry and changes the market structure,that is,the market structure of the banking industry has an intermediary effect on interest rate marketization to improve bank profits.Finally,the following suggestions are given on how China’s commercial banks can further improve their profitability in the process of interest rate marketization:establish and improve the interest rate pricing mechanism and improve their independent pricing ability;Take asset business as the entry point to comprehensively improve business capabilities;Pay attention to cost management to reduce costs and increase efficiency;Increase non-interest income and diversify your business route.