Empirical Analysis On The Proportion Of Real Estate Loans Affecting The Stability Of Commercial Banks

Accompanied by the rapid development of national economy, China’s real estate market appears a trend of rapid expansion, especially the policy of welfare housing distribution was canceled in1998, the contribution of real estate industry to GDP rose to16.1%in2009from3.7%in1997, obviously real estate has become the pillar industry of China.The real estate industry is closely linked with the banking industry. On the one hand, the prosperity of the real estate market cannot do without the support of the bank loans, the bank credit is the main financing channels for the real estate market under indirect financing system led by bank loans, In the supply,bank loans are the main source of funds granted to real estate enterprises, and provides important support for the normal operation of the chain of real estate funds. In the demand, housing mortgage loans of commercial banks has become the main financial support of the demand for consumer purchase. On the other hand, generally the period of real estate loan is longer, and loan interest rate is higher than the general project loans, thus real estate loan can get a higher return on investment. In order to get more profit,, commercial banks turns real estate loans as one of its important business. However, the expansion of the scale of real estate loans may increase the mismatch risk of duration and credit risk of default of the commercial banks, once these potential risks are beyond the control, they can easily lead to instability of the commercial bank. Therefore, it is particularly necessary to explore seriously the impact of the real estate loans on the bank’s own stability level and the transmission mechanisms as well as the degree of influence, so as to avoid as much as possible the lessons of the real estate credit in foreign banks, this article will analyze the impact of real estate loans on bank stability both theoretically and empirically.The purpose of this study is to explore three questions,1.what is the connection between the share of real estate loans and bank vulnerability, is there a linear relationship or non-linear, the positive or negative?2.If such a relationship exists, then how does the proportion of real estate loans affect the level of bank stability, what is the transmission mechanisms? How much the proportion of real estate loans affect bank stability, whether there is a great value, when it is less than this value, the increase in real estate loans is favorable; the increase is harmful when it is greater than this value. The understanding of the dynamic relationship of share of real estate loans and bank stability level is a reference for government to formulate scientifically real estate policies as well as the commercial banks to control credit risk.The research ideas in this article is based on more than a few questions, first, in the first chapter according to a summary of the review of the relevant literature, we find most people believe that the improvement of real estate loans will have a negative impact on bank stability, but their study is mainly based on credit risk of real estate loans,there is not a comprehensive analysis of the effect of the credit risk and interest income effect of real estate loans, and the majority of the research conduct qualitative analysis, lack the support of quantitative data analysis.Chapter2describes the development status of China’s real estate loans and the commercial banks stability level, and there is an obviously upward trend in real estate loans from2003to2010, at the same time, banks stability shows phased changes. Next, in the third chapter bankruptcy probability model provides theoretical support for the relationship between real estate loans and the level of bank stability, we select four indicators:non-performing loan ratio, capital adequacy ratio, return on assets and asset-liability ratio to build a composite index in order to measure the stability of commercial banks, and analyze the feasibility of the comprehensive index. In the fourth chapter, this paper selects the historical data of14commercial banks from2006to2011to build a regression model, successively does unit root test and cointegration test, finally, chooses a random effects model to make a regression analysis, and interprets the regression results.Finally, Chapter5gives the conclusions of this study,(1) Theoretically, there is a bell-shaped connection between the proportion of real estate loans and commercial bank stability, that is, there exists a critical value, within the value there is a positive correlation between the share of real estate loans and bank stability; beyond the value the proportion of real estate loans will adversely affect the stability of the bank. Empirically in China there is a positive correlation between the share of real estate loans and bank stability, that is, the share of real estate loans does not reach the critical value.(2) The proportion of real estate loans affect the stability of the bank mainly through both credit risk effect and interest income effect, however, at this stage, credit risk effect of the real estate loans is not obvious in China, interest income effect of commercial bank is more obvious. we also propose relative recommendations for the sound operation of the bank.