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

In the 1960s,the U.S.Regulation Q strictly regulated and controlled the upper limit of deposit interest rates,under which a large amount of deposits began to flow to the capital market with higher returns,a phenomenon called "financial disintermediation" by economists.Since the 1990s,especially in the 21st century,the development of Internet technology in China has been booming,and the development of the capital market has been continuously promoted,based on this background,the phenomenon of "financial disintermediation" has been deepening,and commercial banks occupy a dominant position in China’s financial market,so they will be the first to be affected and challenged by the financial disintermediation.So,for commercial banks,is the deepening financial disintermediation a shock or an opportunity? What impact will it bring to commercial banks? How should commercial banks face this dilemma and enhance their profitability? In the following,this paper will conduct an in-depth study with these objectives in mind.This paper uses a panel of 35 banks in China from 2010 to 2021 as a sample,and uses a combination of qualitative and quantitative analysis to analyze how financial disintermediation affects the profitability of commercial banks.First,this paper compares the relevant literature on financial disintermediation and commercial banks’ profitability,and clarifies the ideas of this paper;then,it introduces the concept of financial disintermediation and related theories systematically and comprehensively through qualitative analysis,explains the mechanism of financial disintermediation on commercial banks’ profitability,and summarizes the current development status of financial disintermediation and the specific situation of commercial banks’ profitability in China with data.Then,in the process of quantitative analysis,this paper constructs financial disintermediation indicators from macro perspective and micro perspective respectively,and constructs models based on these two perspectives respectively.After conducting a series of tests,the fixed-effect model is finally selected to empirically test the impact of financial disintermediation on the profitability of commercial banks.Based on the theoretical and empirical results,this paper draws the following conclusions: first,from a macro perspective,financial disintermediation has a positive impact on the profitability of commercial banks;second,from a micro perspective,financial disintermediation will significantly weaken the profitability of commercial banks;third,due to the disintermediation correction effect,the positive impact of financial disintermediation on the profitability of commercial banks will be more obvious at the macro level,and at the micro At the micro level,the negative impact of financial disintermediation will be partially offset.In response to this conclusion,relevant countermeasures are proposed: first,promote the reform of diversification of income sources and increase the share of non-interest income;second,regulate the development of Internet finance and strengthen exchanges and cooperation with non-bank financial institutions to achieve a win-win situation for both sides;third,guide the overall layout of financial disintermediation as a way to promote the coordinated development with the real economy.