Research On Competition, Risk And Stability Of Commercial Banks In China

The bank of China reforms since the start in the 1980 s, through the cultivation of market participants and the establishment of a modern financial enterprise system, and by the entry of foreign banks, state-owned bank property right reform and advance loan interest rate market depth, successfully introduce market competition mechanism into the modern banking system, which consolidate market competition. This significantly improve bank management efficiency and dynamic but at the same time pose a severe test on anti-risk capability of banks. To clarify changes in market structure in the reform process of the banking sector and its ability to anti-risk, on the basis of research on traditional banking competition, combined with management practice and China’s banking sector reform, from " risk transfer ", " franchise value " " profit margin effect " perspective, we test the relationship between banking market competition and risks of banks, and launched depth exploration on the relationship between operating mechanism and the critical conditions..Then the paper select the data of sixteen listed banks during the period of 2003 to 2013, use GMM approach to test the relationship between competition and risk of banks and its main conclusions are as follows, firstly, in recent years, the extent of China’s commercial banks monopoly basically showing a declining trend, the main indicators assets, deposits and loans and HHI values have been reduced to the range of low oligopolistic market, which show that our banking market is experiencing from the oligopolistic structure to monopolistic competition market. Secondly, when controlling macroeconomic factors and bank assets and capital adequacy ratio we find competitive loan market stability and risk-taking presents u-shaped relationship, that is, when Lerner index which measures the extent of market competition is large or small the bank risk measured by non-performing loan ratio is very small. Thirdly, the deposit market Lerner index and stability of the banking system also showed a u-shaped relationship, also theindex also supported. Fourthly, when we set the sample into two groups, one is state-owned commercial banks the other is joint-stock banks. We found that the state-owned commercial banks and the bank’s risk is not very significant, but joint-stock banks still support the conclusio. Fifthly, We prove that the size of bank assets has no clear impact on the relationship between bank risk and market competition. but to improve the capital adequacy ratio of banks does help improve the stability and reduce the risk of banks.Finally, the paper come up with some policy recommendations, including two parts. First, the daily management of the bank to improve the strength and ability to control the risks of banks to withstand the crisis. Second, to establish a stable long-term bank strategy, to prevent long-term accumulation of systemic risk.