The Study On The Relationship Between Interbank Business And Liquidity Risk Of Chinese Commercial Banks

In the financial disintermediation and interest rate market reform trend, the competition of the banking industry in our country is increasing day by day, commercial banks urgently need to seek new profit opportunities through business innovation to enhance their competitive strength. In this context, the interbank business is getting more and more attention of commercial banks, and presents the explosive growth in recent years, from the initial short-term position adjustment tool has become an important tool for commercial banks, its business forms are complex and diverse, the scope of cooperation ranges from bank-bank to bank-trust and bank-fund. However, the scale of our country’s industry is expanding, but there is a huge risk, from the perspective of development motivation, the interbank business has been so favored because of its low capital occupancy and the characteristics of avoiding the regulation, commercial banks tend to trade as a "shell" to achieve a disguised form of lending, so they can escape the credit constraints and regulatory restrictions, especially for the buy back sale business which has been developed rapidly in recent years, its profit model depends on the maturity mismatch too much, so it can easily lead to liquidity risk. In addition, with the continuous extension of the business chain, the contact of the financial institutions is more close, risk is likely to spread among them and lead to the outbreak of systemic crisis, and the over expansion of interbank business is also considered to be an important reason of the 2013 money shortage event,it is thus clear that there is a close connection between interbank business and liquidity risk. Therefore, it is of certain practical significance to make a systematic analysis of the relationship between them.This paper attempts to explain the relationship between the interbank business and the liquidity risk of commercial bank from the perspective of theory and empirical analysis. Based on the existing research, aiming at the liquidity risk problems of interbank business, this paper proposes the policy recommendations for the development of China’s interbank business combined with China’s specific situation. The main structure of the paper is divided into five parts:the first part is the introduction, it introduces the research background and significance of the paper, describes the domestic and foreign research status, the research methods and framework of the paper, and points out the innovation and shortcomings of the paper. The second part is the related theoretical basis and analysis, this part defines the relevant concepts of the interbank business and liquidity risk, describes the formation mechanism, evaluation methods and management strategies of liquidity risk, analyzes the impact mechanism of interbank business on liquidity risk, and introduces some typical interbank business operation modes. The third part analyzes the development of interbank business and the current situation of the liquidity risk, expounds the motivation and the development of China’s interbank business, analyzes the current situation of the liquidity risk of China’s commercial banks, and describes the relationship between the two combining the current situation. The fourth part is the empirical analysis part, based on the data of 16 listed banks, it verifies the relationship between the interbank business and liquidity risk through panel data model, and analyzes the empirical results. The fifth part is the conclusion of the research based on the theoretical and empirical analysis above, and it also offers some concrete suggestion for the conclusion.This paper adopts the method of both theoretical and empirical analysis, and compares the development of interbank business and the current situation of liquidity risk of different types of banks. The research shows that there is a serious maturity mismatch problem in China’s interbank business, and the interbank business has shown a "homogeneous" characteristic. At the same time, the development of innovative interbank business extends the business chain, and increases the risk contagion effect, coupled with the lack of relevant regulatory measures, it is easy to trigger a systemic liquidity crisis. Therefore, given the risk factors above, the proportion of interbank business should not be too large, its size should be under reasonable control. In addition, the study also shows that the liquidity risk of commercial banks will be also affected by their own profit level and external macro environment. When these factors change, we must take corresponding measures to deal with it. Therefore, in order to solve the problem of liquidity risk of interbank business, it is not only to adjust the existing business structure, strengthen the monitoring of risk, but also to set the size of the business, improve the regulatory system, and use interbank certificates of deposit, asset securitization and other ways to cope with the impact of internal and external factors at the same time.The innovations of this paper are as follows:firstly, the research perspective is relatively new. In view of the fact that there is little research on the risk of interbank business and that the liquidity risk of China’s interbank business cannot be ignored, the paper is trying to make a systematic analysis about the relationship between them and put forward some proposals. Secondly, the paper uses both theory analysis and empirical analysis as the research method, it makes up for the deficiency of the study on interbank business in view of the fact that domestic analysis about interbank business mostly stays at the theoretical level. At last, on the measure of liquidity risk, the paper overcomes the shortcomings in previous literatures which mostly use static index analysis, it adopts the principle component analysis method to carry on the comprehensive measurement, so the study is more comprehensive and complete.