The Influence Of Franchise Value On The Issuance Of Bank Wealth Management Products

Since 2009,wealth management products have become one of the most important sources of funds for commercial banks.As a short-term financing tool off the balance sheet,banks have fewer restrictions on interest rates for wealth management,raised funds are not subject to loan-to-deposit ratio restrictions,and capital investment is not restricted.Therefore,wealth management products have become a way for commercial banks to conduct regulatory arbitrage and absorb deposits in disguise,and have become the most important part of China’s shadow banking system.However,the development of bank wealth management business will increase the risk level of banks and even the financial system.Bank wealth management products help banks break through regulatory constraints,and banks have the opportunity to adopt more aggressive investment strategies and increase the proportion of investment in high-risk assets.In addition,the rigid redemption characteristics of wealth management products have pushed up the cost of raising funds for banks and pushed banks to carry out high-risk investment activities.In order to prevent the spread of financial risks in the financial system,the China Banking and Insurance Regulatory Commission and the central bank have issued new regulations on asset management to govern shadow banks represented by bank wealth management products.Therefore,we can’t help but wonder why banks are so active in issuing wealth management products in the face of increased risks? What factors affect banks’ willingness to take risks in issuing wealth management products? Has the new asset management regulation reduced the risk of banking wealth management business?Based on the microscopic perspective of banks,this paper uses the unbalanced panel data of 178 commercial banks from 2010 to 2021 to carry out theoretical analysis and empirical testing on the driving mechanism behind the issuance of wealth management products.The results show that:(1)First,the value of the franchise It is an important factor affecting the issuance of bank wealth management products,and the direction of influence is different before and after the introduction of new asset management regulations.Specifically,before the introduction of the new asset management regulations,high franchise value reduced the willingness of banks to take risks and thus inhibited the issuance of wealth management products.After the introduction of new asset management regulations,investors tend to choose banks with high franchise value that have a good reputation and strong investment research capabilities.Banks with high franchise value will issue more wealth management products.(2)Franchise values from different sources have different impacts on the issuance of bank wealth management products.From the perspective of the franchise value related to the market,before the introduction of the new asset management regulations,the substitution effect of bank deposits and wealth management products dominated,that is,the weaker the ability of banks to absorb deposits,the more it can promote banks with low franchise values to issue more Wealth management products: After the introduction of new asset management regulations,the synergistic effect between bank deposits and wealth management products is stronger,that is,the stronger the ability of banks to absorb deposits,the more it can promote banks with high franchise value to issue more wealth management products.From the perspective of the franchise value related to banks,before the introduction of the new asset management regulations,the higher the operating efficiency,it will weaken the inhibitory effect of the franchise value on the issuance of wealth management products;There is no significant effect on the relationship between wealth management product issuance.(3)The new regulations on asset management have effectively controlled the hidden risks of bank wealth management products.The new asset management regulations break the rigid redemption of wealth management products and prevent banks from taking excessive risks.After the introduction of the new asset management regulations,the proportion of net worth wealth management products has been increasing,the average term of wealth management products is long,and the proportion of non-standard asset investment has declined.It can be seen that the new asset management regulations have effectively restrained the transfer of wealth management product risks between markets and improved the ability of financial services to serve the real economy.The empirical results of this paper provide the following enlightenment:(1)First,in the practice of bank risk management,both external supervision and bank selfdiscipline should be taken into consideration.(2)Second,focus on supervising banks with low franchise value.From the empirical results,before the new regulations on asset management,banks with lower franchise value will issue more wealth management products and have a higher willingness to take risks.(3)Finally,small and medium-sized banks should strengthen liability innovation and improve the diversification and personalization of liability instruments.Affected by new asset management regulations,off-balance sheet financing methods are gradually returning to on-balance sheet.Banks with low franchise value cannot raise funds through the issuance of a large number of wealth management products.The capital pressure of small and medium-sized banks is prominent.At the same time,investors’ investment channels are not well matched with their own risk and return preferences,there is an urgent need for banks to innovate investment tools.