Commercial Banks Net Interest Margin Impact Factors And Stress Testing

The net interest margin reflects the profitability of the commercial banks, especially under the condition that Chinese bank do not go very deeply into the off-balance sheet and intermediate business, net interest margin isstill the main source of profits for commercial banks. Research on the net interest margin can predict and analyze the profitability of commercial banks. In the context of the interest rate market-oriented reforms and the intensifying competition in Chinese financial industry, the commercial banks’net interest margin became more and more variable. So it has important theoretical and practical significance to have a research on commercial banks’ net interest margin. This paper, with reference to the existing research on the basis of the theoretical model of "market maker" reclassified the indicators might impact the net interest marginaccording to the different dimensions, combined with empirical analysis based on the Chinese financial industry within119banks’operation data from2001to2010.The fixed effects model helps to get an analysis on the factors which could have impact on the net interest margin. Simultaneously this paper compared the different historical stages of the market-oriented interest rate reform and the historical data between Chinaand the US. Use of dynamic panel data model, the establishment of commercial banks face the risk of commercial banks’net interest margin impact model, based on the VAR analysis and stress testing, by calculating the different market pressure environment, commercial banks’net interest margin, forecast and analysis the soundness of the financial system.Considering the net interest margin on the value of the dynamic impact model could explain of an impact which deepening of the reform of Chinese interest rate market pose on the issue of net interest margin, macro-dimensional factors which have impact on the net interest margin is significant, but as the measurement of an important indicator of the risk of commercial banks credit risk is not significant. It shows that Chinese market-oriented interest rate reform is effective, but it still needs to further deepen from the eventual establishment of the ultimate goal of the effective interest rate system. Based on econometric analysis, it found the net interest margin, operating costs, loan tendencies, the size of the transaction, stealth interest, reserve assets, the rate of economic growth, the price index, interest rate fluctuations affect the current period net interest margin, taking the credit risk into account, net interest margin impact model. VAR analysis and stress testing based on the establishment of a dynamic net interest margin model. The VAR analysis found that the Chinese commercial banks can maintain a more stable and effective net interest margin unless that Chinese financial system is more robust run. Sensitivity testing found that the macro dimension factors are more sensitive to the movement of the net interest margin,net interest margin stress tests mainly consider the economic impact to the environment, changes in the impact of the net interest margin. By Monte Carlo simulation method, historical scenarios test the commercial banks by moderate shocks may face negative net interest margin, and assumed scenario testing, when the economic environment is mild impact, commercial banks may face negative net interest margin, subject to moderate impact, will impact on the soundness of the financial system.The research of net interest margin research is mainly based on macro factorsof different dimensions, combined with Chinese commercial banks historical data. In the dynamic model, it studies the lag affect on the net interest margin. Macro-dimensional factors impact the net interest margin is more sensitive for this feature and the study found the back test focused on the macroeconomic environment for the study of stress tests, sensitivity tests found. According to the established model of dynamic net interest margin impact, respectively test the historical scenario testing scenarios take into account not only the intrinsic link of the current economic environment, economic indicators also considering the unpredictable nature of the changes in economic indicators, objective and comprehensive testing the performance of the net interest margin in the subject to varying degrees of economic shocks. Meanwhile, this paper has the innovative direct selection of the net interest margin as test variables, the profitability of commercial banks is expected to intuitively reflect pressure conditions and the soundness of the financial system. Research methods, through a combination of the methods of statistical analysis of the historical data and panel data of Chinese commercial banks, the establishment of dynamic net interest margin impact model, and a pressure test, inspection of Chinese commercial banks in the face of normal fluctuations in the economy and the unexpected impact of earnings expectations effectively risk measurement and risk early warning methods, improve the system of risk aversion.