Research On The Factors Affecting Chinese Commercial Banks Net Interest Margin

The net interest margin is the difference between interest-earning asset yields andinterest-bearing liabilities rate in the commercial bank. The interest margin for thecurrent operating conditions of the commercial banks in China is the main source ofprofits for banks and directly reflects the bank’s profitability. With the advance ofChina’s gradual marketization of interest rate, the spread management gradually arousedgreat concern of government and commercial banks. Spread management not only can beused to improve the profits of commercial banks, but also can be used as policy tool ofmacro-economic regulation. The premise of the effective spread management is to sortout the impact of commercial banks net interest margin. It can also evaluate the effect ofChina’s gradual marketization of interest rate to study the current impact of Chinesecommercial banks net interest margin.The factors affecting commercial banks net interest margin change as the economicenvironment, policies and systems and bank operating conditions change. Starting formthe theoretical models, the paper summarized the impacts of commercial banks netinterest margin. They were the structure of competition in the market, interest rate risk,basic margin, reserve opportunity costs, recessive interest expense risk aversion, creditrisk, management efficiency, size of loans, securities investment scale, financialinnovation and the macro-economic environment and so on. On the basis, the paperstudied the factors affecting Chinese commercial bans net interest margin through anempirical model.Secondly, we selected a total of240observations including2007-2011data of48Chinese commercial banks. The regression results show that the current marketconcentration, the size of loans, interest rate risk and credit risk factors showed asignificant positive correlation between China’s commercial banks net interest margin.There was a significant negative correlation between financial innovation ability ofcommercial banks and net interest margin. Benchmark spread and net interest marginalso highly correlated but the symbol of the relationship is uncertain. At present, China’scommercial banks management efficiency and the management of risk aversion is not to affect the net interest margin. The current relationship between China’s commercialbanks’ securities investment scale, the opportunity cost of the reserve and the net interestmargin need to be studied further.Thirdly, according to the conclusions in the article, we got that the commercialbanks should change their own profit model as soon as possibly, and increase the size ofloans. Government departments should relax restrictions to allow the private capital intothe banking sector and should continue to deepen the reform of the interest ratemarketization. These measures can optimize the level of China’s commercial banks netinterest margin and improve the profitability of commercial banks.