| With the development of openness of the financial market, economic reform has become a necessary condition to accelerate economic development in our country. After30years of effort, the reform has been effective, the socialist market economy has been established at a preliminary level. However, the speed of financial system reform is slow, restricting the further deepening of economic reform, and the interest rate liberalization plays a core role in the financial system reform.Low interest rates under control distort commodity prices to some extent, resulting in misallocation of resources, and interest rates do not function well as economic leverage. Non-market interest rates limit the financial market reform. Therefore, in order to promote economic reform and improve the efficiency of reform, accelerating the process of interest rate liberalization is the key. Coupled with the slowdown in China's economic growth, economic restructuring, the impact of financial disintermediation, information technology development and other aspects of development, it's inevitable for China's commercial banks to transform business models."Twelfth Five-Year Plan" clearly states that "transformation of economic development model" is an important strategic goal of this period, China's economic structure and connotation certainly will change dramatically, with the advance of China's financial market reform, interest rate liberalization has entered a substantive stage, the capital market is market-oriented. Lending rates have been largely liberated. Deposit rates are also floating with a certain band. Price competitions among commercial banks further drag down the commercial banks' traditional credit business profits, and bring operation risks to commercial banks. In this context, it is urgent to make transformation to serve the real economy. Only if commercial banks change in development models, vigorously develop the traditional business areas, implement a variety of intermediary business and increase revenues of intermediary business can commercial banks avoid operation risks brought by price competitions stem from interest rate liberalization and create new profit growth point.Under these guidelines, this paper summarizes and comments on the existing studies, and defines some basic concepts. Then theoretically analyzes the motivation, substance, and the need for restructuring commercial banks' intermediary business. This paper also empirically analyzes the significant impact of price competition on commercial banks'operation risk and performance. Price competition leads to contraction of net interest rate margin, increases operational risk of commercial banks, and reduces the profit of commercial banks. Increase of the proportion of intermediary business income can reduce operation risk and increase the performance of commercial banks. Therefore, increasing the proportion of intermediary business revenue is necessary to reduce risks and nurture financial institution of service; in China, the development of intermediary business is not mature, and intermediary business transformation is an effective way to increase the proportion of intermediary business revenue. Finally this paper discusses strategic development of intermediary business from the perspectives of innovation and risk.Based on the above ideas, this paper applies approaches combining normative economics and empirical economics, inductive and deductive methods, mathematical statistics and data mining. This paper is organized as following: setting hypothesis, establishment of model, data collection, data analysis, and conclusion. This paper analyzes impact of interest rate liberalization on the operation of commercial banks from the perspectives of commercial banks' innovation, deposit and lending interest rate changes, interest rate fluctuations, competition among banks as well as vulnerability of commercial banks. Then this paper discusses diversification theory, synergy theory, modern asset portfolio theory, financial innovation theory to provide a theoretical basis for intermediary business development. This paper also uses regulation avoidance effect hypothesis, commercial bank risk-sharing hypothesis, and moral hazard hypothesis to demonstrate motivations to develop intermediary business. The next section analyzes the substance of intermediary business from the views of financial market development, commercial banks weakening, intermediary business development and changes of bankings' functions. Moreover, this paper illustrates the need for intermediary business development from perspectives of financial disintermediation, capital constraints, contraction of net interest rate margin and bank competition.In the empirical analysis, the paper first analyzes intermediary business and commercial banking security. This paper examines the dynamic trend of proportions of net interest rate margin and non-interest income and its impact on banks'risks. This paper finds that diversification in commercial banks is still low, the business has focused on traditional banking credit, and risk-resisting ability is low. Banking development is uneven, listed banks have a high ability to resist risks brought by price competition, however, non-listed banks are more vulnerable in the face of price competition induced by interest rates liberalization. Therefore, the implementation of interest rate liberalization should not be too fast, otherwise it will result that only listed banks and other large commercial banks can survive, while regional commercial banks like city commercial banks, rural credit cooperatives are likely to lose in the competition, there are risks of merge and bankruptcy. Regional commercial banks should be given a certain time to develop intermediary business and establish modern financial service system.Subsequently, this paper conducts empirical research on intermediary business development and commercial bank performance. This paper examines how intermediary business development affects operation performance in the process of interest rates liberalization. Through empirical studies this paper concludes that with the development of interest rate liberalization, banking competition will be fierce, reduced net interest rate margin will result in decreased operating performance of banks, so it is very necessary and urgent to find a new growth point.Finally, based on concept analysis, theoretical analysis and empirical research, this paper conducts in-depth thinking on intermediary business development from the points of view of innovation and risk. Commercial banks are required to establish a correct philosophy about intermediary business. Under right philosophy and market positioning, banks can develop differentiated intermediary business products for different customer groups and use modular product development strategy. After the product development, commercial banks can use either cost-plus pricing strategy, competition-oriented pricing strategy, or relationship-oriented pricing strategy according to different marketplace. Finally, commercial banks should develop effective risk management mechanism. Effective risk prevention and control are important guarantees for the development of intermediary business, commercial banks should attach great importance to risk management of intermediary business, strengthen information disclosure, and insist on both business development and risk control to ensure the safety and profitability of management.Innovative points of this paper lie in:(1) Development of the intermediary business is forced financial reform.In the background of the interest rate liberalization, the traditional credit business of commercial banks faces greater competition risk due to price competition. This paper presents China's commercial banks operating model transformation is Forced transformation. Fierce competition in the traditional credit business makes commercial banks develop intermediary business, improve service quality, and avoid competition risk.(2) From the point of view of capital constraints to analyze intermediary business developmentAffected by Basel III, the capital adequacy ratio of commercial banks must meet a higher value in order to meet regulatory requirements. This further reduces the credit funds available, consequently, profits of commercial banks are bound to decline. In this case, commercial banks have to develop intermediary business and add new profit point in order to eliminate the adverse effects of capital adequacy ratio requirement bring.(3) Conduct empirical research on listed banks and non-listed banks respectively.Existing empirical studies of micro-development factors of China's commercial banks are largely based on listed banks. However, this paper contains both listed banks and non-listed banks, and divides them into two subsamples according to whether the bank is listed. Researches are conducted on both subsamples. Conclusions are made on the basis of comparison.(4) Use net interest margin as a proxy for competition among commercial banks In the current study, the proxies for competition among commercial banks include banking concentration and the Lerner index. This paper argues that it is not appropriate to use degree of competition in the banking sector as proxy variable under the background of interest rate liberalization. This paper selects price competition indicator in the banking sector as a proxy for competition; however, due to the limited disclosures of the city commercial banks, it is difficult to calculate the Lerner index, in this case, we choose net interest margin as a proxy for competition in empirical research.Because of limited academic achievements and personal vision, this paper is limited in the following aspects:due to the difficulties in collecting data of non-listed city commercial banks, only a few banks'data is collected, full coverage is not achieved. This may somewhat affects empirical results. However, according to the principle of large samples, the number of samples used in this paper covers1/3-1/2of the banking sector. Even though not all the commercial banks are included, the result still has credibility.Secondly, in the part of strategic design of intermediary business, because of limited practical experience of the author, coverage and depth of the strategy are to be strengthened. Transformation of the business model of commercial banks is my long-standing research direction. In the process of future study and work, I will continue to accumulate knowledge and make continuous improvement in the hope of providing a reference for the development of intermediary business of China's commercial banks. |
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