Intermediary Business And Efficiency Of Commercial Banks

Since the US sub-prime mortgage crisis spread all over the world and became the global financial crisis, the supervision standards towards commercial banks become increasingly strict. The continuously improving requirements on capital adequacy ratio has restricted the loanable funds scale for commercial banks when carrying out traditional credit businesses. At the same time, foreign capital banks have entered China comprehensively. The appearance of “Financial Disintermediation” phenomenon makes commercial banks facing more brutal competition and it brings challenge of reducing interest spreads of deposit and loan. The stable progress of China’s interest rate marketization has turned out to be a hot topic related with the survival and development of commercial banks at present. The interest rate marketization has brought completely new development opportunities for commercial banks and has endowed them with wider independent pricing space. However, at the same time, it narrows the interest spreads of deposit and loan retrievable and makes the traditional operation model which relies on interest spreads of deposit and loan to make rich profits hard to be maintained. Under this trend, if the commercial banks continue to insist on healthy and sustainable development, then they need to change their traditional operation model on the basis of interest spreads of deposit and loan to the profit pattern which pays more attention to the service instead of capital. The intermediate business possesses advantages such as low risk, low investment and high profit, thereby has become importance measures for commercial banks to improve their profitability and competition. In addition, intermediary businesses development has also exerted its collaborative role on the assets and liability businesses. It aims to discover, strengthen and service customer bases during the business which has provided a channel for commercial banks to maximize their profitability. Therefore, the following measures are essential for operators and managers in the banking sector: to research on the functional mechanism of intermediary businesses towards commercial bank efficiency; and to analyze problems appeared in the operation and development process of China’s commercial banks from the efficiency perspective.This thesis firstly reflects on and concludes literature related with intermediary business and commercial bank efficiency. The intermediary business possesses characteristics are derived from traditional businesses and caters to the all-round demands of modern financial market. Based on the above intermediary business characteristics and by applying economy of scope as the theoretical basis, this thesis systematically elaborates the influencing mechanism of the intermediary business on two channels which are commercial bank cost and profit, and then analyzes the comprehensive functions on commercial bank efficiency by carrying out intermediary business.This thesis has collected data from 16 listed commercial banks in China from 2005 to 2014. It measures and calculates listed commercial bank efficiency both dynamically and statically by using super DEA model and Malmquist exponential method. It then classifies the banks based on their nature and disassembles Malmquist exponential. It compares efficiency between various types of banks and observes their development trend as well as analyses the causing reasons. Later, total factor productivity measured by super DEA model is defined as the explained variable. Basing on that, this thesis applies Stata software to establish Tobit regression model. Then, it tries to find out the relationship and influencing factors between intermediary business and efficiency of the commercial banks from the micro level and then assesses on the effect degrees of various factors.In the end, based on the above theoretical analysis and empirical result, this thesis raises countermeasures and suggestions on improving the intermediary business development of China’s banking sectors and operation efficiency by combining features possessed by China’s economy environment and commercial banks.