The Impact Of Financial Disintermediation On The Soundness Of China’s Commercial Banks

With the development of international and domestic economic situation and financial reforms, there is the phenomenon that the capital runs outside the financial intermediaries and the direct financing gradual increases in the proportion of the total financing in China. The rapid growth of financing capacity of capital markets (especially the stock markets) weakens the ability of banks and other depository institutions that take in deposits; at the same time, the rise of direct financing channels provides more access to capital for enterprises, in which the role of banks as the financing media in the traditional sense is weakened. In general, we refer to this phenomenon as financial disintermediation.Since the reform and opening, the phenomenon of financial disintermediation has emerged in our country and the trend has gradually deepened as a result of rapid economic growth, increasing national wealth, deepened financial system and the rapid development of various types of financial markets. In the progress of financial markets, the financial disintermediation is bound to be an issue that needs to be faced in the development of the commercial banks. Financial disintermediation means that more capital runs outside the banking system so that the role of banks as a financing intermediary can only be weakened, which means that the traditional spread income is reduced and capital borrowers begin to get money through direct financing channels like stocks and bonds, and that the savings rate has dropped, which have forced commercial banks to face enormous competitive pressure from outside the system and inter-industry.As a major indirect financing channel, the stable and healthy development of commercial banks has a significant impact on the development of the whole financial industry. Given the special nature of our country and the economic environment, financial disintermediation exhibits asymmetric features. After in-depth analysis from different angles of the impact of financial disintermediation on the soundness of commercial banks by domestic and outside scholars, most scholars believe that financial disintermediation has both pros and cons to the soundness of commercial banks. Financial disintermediation results in the loss of many traditional spread income sources, the increase of the banks’ liquidity risk and the reduction of the proportion of savings deposits, and the increasing cost of capital weakens the ability to reduce risks of commercial banks. However, financial disintermediation presents new challenges for commercial banks to develop their business. Commercial banks can get rid of dependence on traditional spread income by changing the business strategy and developing new profit growth point.Based on the above research background and significance, this paper combines the normative research and empirical research methods, analyses the effects the financial disintermediation has on the soundness of China’s commercial banks. Based on the introduction of commercial banking and financial soundness index and the specific measure of the financial disintermediation degree and disintermediation correction effect, this paper empirically tests the specific circumstances and practical significance of the effects that the financial disintermediation has on the soundness of China’s commercial banks through the construction of panel data and the random effects of regression model, providing a reference for the healthy development of China’s commercial banks.