China’s City Commercial Banking Fragility Analysis

The banking system is the core of the financial system, the healthy development of the banking system plays a vital role to the development of the national economy.During Japan’s banking crisis, the Nordic banking crisis, the Asian financial crisis happened in the last century,and United States subprime mortgage crisis in2007,there has been a large-scale bank failures, which make people fully aware of the fragility of the banking system.In recent years, with the continuous progress of China’s financial market reform, city commercial banks,the third tier of China’s banking system, develop rapidly and expand the growing scale increasingly.City commercial banks are based on the formation of the original Urban credit cooperatives and inherited the former Urban credit cooperatives’ high proportion of non-performing assets, high operating costs and low management level.At present,1,300Urban credit cooperatives which has more than3billion assets developed into144city commercial banks which has a total capacity of about8trillion.With increasingly fierce competition in China’s financial market, city commercial banks have to face challenges from state-owned banks, joint-stock banks, the entry of foreign banks and the Internet financial development.The city commercial banks are prevalent have blind expansion and cross-operating features.Based on this background,we need to research the fragility of China’s city commercial banking.Since the last century, scholars have started research on bank fragility from the aspects of the macro-economic cycle, asymmetric information, bank management and measure the degree of bank fragility by using macroeconomic indicators,banking supervision indicators and so on.Our research is always concentrated on fragility of state-owned commercial banks, but rarely involved city commercial banks.The main content of this paper is to research the fragility of China’s city commercial banks based on the mature theory home and abroad.This paper introduces the connotation of bank fragility and related concepts.Then on the basis of mature theory,we analysis the fragility of China’s city commercial banking from a qualitative point of view,involving profitability, liquidity, security etc.In order to measure the fragility degree of city commercial banks, this paper collected data from23samples banks including state-owned banks, joint-stock banks and city commercial banks,selected12indicators such as NPL ratio, return on assets, loan ratio,etc,then compared with state-owned banks, joint-stock banks bying using factor analysis.The empirical results show that, compared with the state-owned banks and joint-stock banks, city commercial banks fragility should be concerned.At last,we find out the reasons and put forward the corresponding suggestion.