Causes Of Fragility Of Rural Banks

Rural Bank established since2007, has become an important component of the rural financial market. At of the end of September2012, the number of Rural Bank has reached799, covering China’s30districts. The emergence of the rural banks, has injected new vitality into the rural financial market. Make an important contribution to make up the rural financial market gaps and improve rural financial environment. The importance of rural banks in the rural financial market, so how to keep its sustainable development has become a critical issue. Dualistic pattern of China’s rural financial market and its high risk customer base make the rural financial market become very fragile. This article aims to analyze the causes of rural banks fragility in rural financial markets in order to prescribe the right medicine to ease the risk of rural banks to reduce their fragility.In order to study the fragility of the rural banks, I have combed the theory of financial fragility and analyzed he characteristics of China’s rural financial market fragility. On this basis, I selected the following indicators of China’s30provinces where have set up rural bank at the end of2010, from the three aspects of external economy, endemic to China’s rural financial dual structure, as well as village banks robustness to measure the fragility of the rural banks.The indicators include:GDP of every province/national GDP、the average GDP growth rate of every provinces from2007to2010, agriculture, forestry and animal husbandry output value of every province/GDP of every province, the agriculture、forestry and animal husbandry output value of every province/the total proportion of national output value of agriculture, forestry and animal husbandry, the average growth rate of the provincial forestry, animal husbandry output value from2007to2010, income of rural residents of every province/the total income of rural residents, income of urban residents and rural residents income ratio of every province, rural credit cooperatives loans of every province/total loan balance of rural financial institutions of every province, rural credit cooperatives NPL ratio in every province、The rural bank’s NPL ratio of every province, rural bank average loan amount for each farmer of every province, rural bank’s loan-to-deposit ratio of every province, rural bank loan balance of every province/loan balance of rural financial institutions of every province, Deposit balance of rural bank depositors of every province/rural bank deposit balance of every province.Through the analysis of factor analysis model, the degree of economic development of the regions, competitiveness of rural bank and its asset quality are the main causes of fragility of rural banks. Then I sorted the fragility of the rural banks in every province. The10most fragile provinces are Hainan Province, Ningxia Hui Autonomous Region, Xinjiang Uygur Autonomous Region, Fujian Province, Gansu Province, Qinghai Province, Shaanxi Province, Guangxi Zhuang Autonomous Region, Guizhou Province, Inner Mongolia Autonomous Region. Two from eastern provinces, one from central province seven from western provincesAt the end.I analyzed the causes of the vulnerability of rural banks from three angles of uneven regional development, the competitive disadvantage of the rural banks at absorbing deposits and credit risk in rural areas.