A Study On Commercial Banks’ Intermediary Business Innovation And Its Influence On Banks’ Performance

As an important part of the financial system, banks play a significant role in maintaining the normal operation of our modern economy. The good operating system of modern banks make the steady economic development of a country possible. From the macroeconomic point of view, the development degree of banks is related to the implementation of national economic policies. While from the microscopic point of view, which can influence the economic life experience of personal or business microscopic.From the development of the domestic banks, the current conventional interest income is facing a great challenge. Firstly, the deposit interest rate controls just liberalized on October 24, 2015, when domestic interest rate market was substantially completed, which suggested the greater uncertainty in interest income of banks. Secondly, the development of capital markets and the meteoric rise of Internet Finance drive the evolution of the traditional way of financing, which make banks face disintermediation both in assets and liabilities. Thirdly, Economic Globalization is still on the way, foreign banks continue to explore and expand in our country, which further erode the profit margins of domestic banks, and make enormous impact on the development of China’s commercial banks as well. There is no doubt that these changes are great challenges to the banking industry, domestic banks have no choice but to consider the transformation of profit model. Foreign banks, which also experienced the interest rate market and financial disintermediation phases, have made good use of intermediary business and made good profit.Based on the backgrounds above, this article aims to study the intermediary business innovation of domestic banks through qualitative analysis and quantitative analysis methods, and further in-depth analyze its influence on banks’ performance. After a study of relevant meterial,we find that banks’ intermediary business have enriched both in quantity and quality. Besides, our banks are on the way to form collaborative effect by cooperating with other agencies, which will help the innovation of intermediary business a lot. Intermediary business is increasing both in size and proportion every year, however, the total proportion is not big enough. See from the type of business, there is a higher proportion of traditional intermediary business, lower proportion of modern business. Above all, the current situation shows that innovation ability needs to be improved.This article further analysed the effect of intermediary business innovation on banks’ performance. The result showed that without considering the cost of equity capital, innovation will significantly improve banks’ performance, no matter for large-scale banks or small ones. When considering the opportunity cost of equity capital, large banks improvement action still exists. However, there is no significant positive impact on small and medium banks. This phenomenon may be due to the relatively low levels of cost management of small and medium banks. In order to perform well, banks need to improve cost management and balance investment in human resources. Also, governments should perfect regulation and law environment, and accelerate mixed financial reform.