China 's Commercial Banks' Pledged Debt Business And Its Impact On Bank Risks

Faced with the international trend of financial globalization and financial liberalization, numbers of domestic commercial banks have actively chosen the business diversification strategy in order to cope with the increasingly fierce competition in the industry, so the contingent liabilities in commercial banks have been developing rapidly in recent years.Firstly, there is a brief overview of contingent liabilities in commercial banks including the definition, business segments, business features, and the disclosure of contingent liabilities in China. Secondly, there is an analysis of the development and the current situation of the contingent liabilities in China’s commercial banks, including the total size and current problems, etc.; thirdly, I use the past-six-years’ panel data of40major domestic commercial banks to establish a panel data model in order to study the relationship between contingent liabilities in commercial banks and management risk of commercial banks. The results of the model show us that the scale of contingent liabilitiesin state-owned commercial banks and joint-stock commercial banks have nothing to do with the management risk of banks. However, the city commercial banks’contingent liabilities have significant impact of commercial banks’management risk which means that the increase of the scale of contingent liabilities will increase the risk of commercial banks. And then I have studied how the different segments of contingent liabilities have impact on management risk of commercial banks. Finally, based on the empirical results, some targeted policy recommendations about management of bank’ risk have been proposed appropriately from the industry and the banks’ own perspectives.