A Study On The Effect Of Non-interest Income On Risk Of Commercial Banks In China

Finance is the core of the economy, Banks are the main part of the financial, andThe healthy development of the banking sector is crucial to a country. In recent years,with the deepening of the market economy reform and market-oriented reform ofinterest rates, and foreign banks, making the increasingly fierce competition in china’sbanking industry. Hence the bank needs to do something to complete the bankingbusiness transformation, diversifying non-interest business, increase the proportion ofnon-interest income. In this context, the study on the effect of non-interest income onrisk of commercial bank’s in china.With the increasing importance of non-interest income and the proportion ofnon-interest income continues to improve, domestic scholars begin to focus on thedevelopment of non-interest and conducted a lot of research. From the existingliterature, many domestic scholars have conducted a lot of research about themotivation and necessity of improving non-interest income, and the most are aboutthe impact of non-interest income on bank performance, less involved in bank risk.Therefore, it is necessary to take advantage of china’s commercial banks data, to dothe research about the relationship between the bank risk and non-interest income, onthe one hand we can enrich existing research; on the other hand, can provide sometheoretical basis about non-interest business for China’s commercial banks.This paper begins with a brief review of the relevant theory and researchachievements, combined with China’s actual situation on the concept and scope ofnon-interest income were defined. Then depart for commercial banks to expandbusiness in non-interest motives were analyzed from the synergies of the theory, thescope of economic theory, portfolio theory and the theory of financial innovation.Then review the development process of China’s commercial banks’ non-interestbusiness. On this basis, the paper detailed analysis the status of non-interest income ofChina’s commercial banks and found that:(1)In recent years, China’s commercialbanks’ non-interest income grew rapidly, accounting for revenue continues to improve,but compared with developed countries, there is a big gap.(2)The amount ofnon-interest income of large commercial banks is higher than the small and mediumcommercial banks and so it is the growth rate of non-interest income.(3)SFC and commission income is still the main source of commercial banks non-interest income,net trading income and net investment income have a smaller proportion of income.In the empirical research, this paper use13listed commercial banks quarterlyfinancial data which the years from2007to2013, as the research object to establishpanel data model, empirical study the relationship between china’s commercial bankrisk and non-interest income. Regression results show that:(1) SFC and commissionincome is minimal risk in the all non-interest income, bank risk negative correlationwith it.(2)Net trading income and net investment income accounted for theimprovement can reduce the risk of the large commercial banks, but it will increasethe risk of the risk of small and medium commercial banks.(3)Overall, the impact ofnon-interest income to large commercial bank risk is greater than small and mediumcommercial banks.(4)Improving asset size and proportion of the cost will increase thebank’s risk. Finally, this paper gives some development ideas and suggestions abouthow to expend the non-interest income business.