Research On China’s Commercial Banking System’s Stability Differences Measure

It’s more than10years for China joining to the WTO so that China’s commercialbanking system has formally ended the five-year protection period. In the face offierce international competition, China’s financial system is undergoing a huge test.Foreign banks will be on a larger scale, more business, faster speed to join thefinancial sector in China, which inevitably impact on China’s current reform of thefinancial system and banking development. Especially after the subprime mortgagecrisis, the U.S. quantitative easing policy and the debt crisis in Europe causesinternational hot money to impact constantly the domestic financial system,international and domestic environment is increasingly complex. As a financialintermediary, commercial banks has a vital role in the economy of a country. The riskof banking system and its contagious bank stability is crucial. And commercial banksas one of the main body of China’s financial system is accepting the internal factorsfrom itself, as well as complex international and domestic environmental challenges.At the same time, its stability is being threatened. The thesis takes the stability ofChina’s commercial banking system as object for the study, and discusses thefollowing issues:1) the commercial banking system factors influencing the stability;2)measure of the commercial banking system stability;3) Commercial Bank of stabilitydifferences in intrinsic motivation. In response to these issues, the major contributionof this study is focused in the following areas:First, this article first definite the stability of the banking system on the basis ofreference to summarize the extensive literature and the related concepts of analogengineering, aerospace science, ecology, such as stability; Secondly, from the macroand micro theories two aspects,a series of theory such as the financial instabilityhypothesis, financial crisis in history, secure borders, said the information asymmetry,adverse selection and moral hazard, the prisoner’s Dilemma, principal-agent problem,the financial entropy theory lay a solid foundation for qualitative and quantitativeanalysis of the stability of the banking system, besides qualitative analysis of factorsinfluencing the stability of the commercial banking system; Finally, the status quo ofthe stability of China’s commercial banking system are analyzed from Internal andexternal causes according to the SCP paradigm. And expound the status of China’scommercial banking system stability from the aspect such as the banking system, capital adequacy ratio, the rate of bad loans, foreign currency assets, real estate, andmany other combinations of actual data and its problems in the qualitative descriptionof the analysis.Secondly, combined with the commercial banking system stability theory, thearticle first selects77factor influencing the stability of the banks in China’s actualsituation, and lays, removes and establishes a four-story indicators architecturethrough the ISM model. Analyzing the main factors affecting the stability of thecommercial banking system and establishing the index system and index help to makea correct estimate of the impact of domestic and international economic situation ofthe banking system, so as to formulate appropriate response measures, and to furtherquantify maintain financial market order, and to protect national security.; then on thebasis of the principal component extracted,using the subjective level of analysis andobjective of principal component analysis sets the weight of each of the majorinfluencing factors, and builds out of the BSS (Banking the System’s Stability) index;using National data and typical examples for Bank of Communications, Bank ofChina, Industrial Bank’s time-series data to make an Empirical Analysis on BSS index,and the results is consistent with reality;.The third, makes a deep excavation by constructing a VAR model to the data andgets five principal components extracted which is unstable, but between whom thereare long-term co-integration relationship and the BSS index and past the test such asthe largest eigenvalue statistic and trace test statistic after ADF balance test,cointegration relations judgment, the Granger causality test, impulse responsefunction, then measures the relationship between the five weights of indicators andbank stability, as well as the impact on the stability. Ultimately, the variancedecomposition results show that the volatility of bank soundness is influenced by itsown, the credit growth rate, relative inflation rates and short-term debt/total debt.And the impact of these factors on the interpretation of the fluctuations of the BSSindex is close to50%, indicating the stability of banks depends on the banking systemitself, besides the impact of international environment and China’s overall nationalstability in a large extent. Measure of the banking system stability is a very complexsystem job, not only impacted by in a variety of factors such as economicdevelopment, social development, the external environment, internal changes, but alsoa delicate job. This needs to constantly update the selection of indicators, monitoringthe results also need time constant validation. So the measure and evaluation of the stability of the banking system is a constantly revised and development process,which is a long process, so that the model can provide a more accuraterecommendation. Make use of fixed effects panel model with varying parametersfrom the vertical, horizontal, and the volatility to analyses deeply the different affectof various factors on the stability of the different commercial banks, as well as thedifference of state-owned banks and non-state-owned banks in taxonomicdistinctness.Finally, according to the results of the qualitative and quantitative analysis,comes up with the policy recommendations for the relevant departments for referencethat maintain a good environment for the aspect such as the development of thebanking system from the macroeconomic environment,the forecasts formacroeconomic trends, and social credit environment, strengthen the banking systemconstruction, enhance the level of self-control, improve banking supervision system,and build a banking system safety net from the three levels which are the access andexit mechanism, the deposit insurance system and the lender of last resort to. Therecommendations have some theoretical and practical value for reform anddevelopment, and strengthening the stability of the management of commercial banksin China.