A Research On The Impact Of Financial Disintermediation On The Profitability Of The Large Commercial Banks

Financial disintermediation is an important economic phenomenon, it have been around since 1960 s, then Japan, Germany and other developed countries have appeared different degree of financial disintermediation too. Due to competition and benefit, financial disintermediation is an inevitable result when the market economy goes to a higher level of development. Financial disintermediation phenomenon will have long-term development trend because the economic level and the financial system will continue to improve with the continuous development of market economy. Financial disintermediation has broad sense and narrow sense: the broad sense is the phenomenon of financing between capital providers and capital needs without the support of financial intermediary;the narrow sense is the phenomenon of financing between capital providers and capital needs without the support of banking system. This article studies impact of financial disintermediation on profitability of the large commercial banks, so we choose the narrow sense. Financial disintermediation causes the financial assets get out of the banking system and go to other places. It affect banks hardly to operate traditional deposit and loan business. It has a profound impact on the profitability of banks. It also had a greater impact on the level of profitability of banks. In recent years, along with our country capital market growing, disintermediation phenomenon is more obvious in banking system and has a long-team trend. CB,ICBC,CBC,ABC have occupied a very important position in China’s banking system. The impact of disintermediation in the these banks will be more prominent. Firstly, the article has a full analysis of the present situation of the financial disintermediation in our country, then combined with the related theory to understand the financial disintermediation better. After that we make quantitative analysis, we use 30 group quarterly panel data of CB,ICBC,CBC, ABC from the third quarter of 2007 to the fourth quarter of 2014.We analyze the effect of financial disintermediation on profitability of these banks by using a PVAR model.Through the study of this paper has the following conclusions: It has a strong effect on the profitability indexes of large commercial banks by financial disintermediation. This is mainly due to financial disintermediation has a impact on asset business of large commercial banks. The large commercial banks will take corresponding measures to respond to the financial disintermediation in dynamical. Profitability index may do so too. Then the financial disintermediation in liabilities of banks is more effective on the index of profitability than financial disintermediation in capital of banks. And it has a similar impact on indexes between financial disintermediation in capital and liabilities. Finally, in short term, financial disintermediation reduce the interest income of large commercial banks and cut down the level of profitability,but in long term, financial disintermediation has a positive influence on indexes of large commercial banks.Based on the research results, we propose corresponding suggestions to improve the profitability of large commercial banks. Specifically, we propose to promote the competitiveness of large commercial banks by business development and better management. So the large commercial banks can be maturing well by making full use of the positive effect coming from the financial disintermediation.