| Chinese commercial bank personal finance products (PFPs as the abbreviation) is a kind of investment instrument, which is designed by commercial bank for gathering capital to invest in one or more certain underlying assets. This market was initiated in2004. In the last7years, it has been developed very fastly. In2010this market has issued more than10thousands PFPs and gathered7.05trillion RMB capital, that is almost two times of the scale than the insurance, trust or fund market.While fast develpment, banks’ behaviors in this market have some problems that will lead this market away from its initial objective which is helping Chinese citizens to set up their personal finance sense, and becoming the basis of bank personal finance service in the future. Banks always use PFPs to acheive other goals, such as attracting more savings, or even avoiding the regulation. At the same time, the regulation policies in this area are far behind the practice, the supervisor always issue new regulatory policy after the risk exposure has happened. There is no empirical research that focuses on the PFP market in China, so the government can not find any theoretical support when they set regulatory policies. This paper is trying to fill the blank.This paper has focused on the factors which affect the banks’ behavior in the PFP market, and the problems caused by these behaviors, there are three major findings:Firstly, this paper first tests the relationship between PFP market structure and banks’performance (the profit ability). The empirical result show that market concentration can bring bank higher PFP profit, bank with market power also perform better, this result support the traditional "Structure-Conduct-Performance" theory. This paper also finds that, bank with good PFP performance will behave more continuously, at the same time, market with high concentration will have a high participation rate. This finding give us a suggestion that to encourage the bank which have PFP business advantage to be more stronger, it can help the market to establish a better structure. Secondly, this paper based on the "market structure-innovating" theory, tests the relationship between saving&loan business market power and the banks’PFP market behavior. The result show that, when bank in a local market have market power in saving&loan business, it will perform worse in PFP market. These banks will issue less PFPs and give investors lower return, which means they just pay little attention on PFP market. These result means the saving&loan and PFP are connected tightly, so the PFP market will suffer lots of external shock come from the saving&loan market which will make the market unsteady. This finding can be used to explain some phenomenon in the PFP market.Thirdly, this paper analyzes the relationship between competition bank faced in PFP market and their behaviors. The research shows that, competition would increase the market risk level. On the one hand, there could be an "excessive competition" between banks, banks will set a higher return which is away from the (?)easonable underlying assets based pricing for their PFPs when they face more competition; on the other hand, competition could force bank to choose more risky underlying assets, this kind of "adverse selection" behavior will increase the internal risk level of PFPs. These two behaviors will bring the PFP market a higher risk level than it should have.Based on the three major findings, this paper has tried designing a system to solve these problems, which is creating a countrywide united PFP market. On this platform, banks can generate a suitable market structure with high concentration and banks have enough PFP profit, while the influence come from saving&loan business is cutting off. This system can also set a return ceiling and auditing mechanism, which will keep the market’s risk in a reasonable range.This paper also review the history of PFPs, besides that, it shows the major characters of the PFP market by statistics analysis, these research can also provide some help to this market’s future development.This paper has made three major contributions. First, it is the first empirical research focuses on the PFP market. Second, this paper summarized characters of the PFP market, and found out the major factor that affect banks’ behavior in the PFP market, these findings can bring some help to the government when they set new PFP regulatory policies. Third, this paper tested some IO and finance theories with the PFP market data, it is a complement to these theories. |
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