Analysis Of The Effect Of Non-interest Income On The Risks Of Chinese Commercial Banks

In the background of interest rate marketization,financial disintermediation and the maxed operations, commercial banks operation model given priority to interest income is unsustainable and profit growth appears constantly degree of decline. Therefore commercial banks have to adjust the existing business structure, attach importance to and actively develop non-interest income business, get rid of the reliance on interest income, optimize the income structure and regard the interest income as important source of banks’ income. In recent years, in the development of non-interest income business our country have already achieved significant results and banks pay attention to the diversification of business structure gradually reducing the dependence on loan business. The result is that non-interest income business is attracting more and more attention and the proportion of non-interest income in the operating income increases year by year.With the development of non-interest income business, its impact on the bank’s risk attracts more and more attention. Because of the different risk of various non-interest income business and the different risk control ability of banks, so the effect of non-interest income on bank’s risks is uncertain. Hence this paper sorts out 14 bank’s figures released in recent 9 years, implements empirical test and analyze the impact of non-interest income business on bank’s risk, providing the beneficial reference for improving banks risk management capabilities and prudential supervision of regulators.This paper employs the method of combining of qualitative analysis and quantitative analysis exploring the effect of non-interest income business on bank’s risk. First of all, according to the actual situation of non-interest income business and consulting banks accounting principles of the annual report, this paper defines the meaning of non-interest income and combs the theoretical basis of operating non-interest income business; then making analysis for the history and current situation of non-interest income business and explaining the risk transmission mechanism of non-interest income from the point of view of operating leverage, switching costs, management risk; on this basis, bank’s risk is measured by Z-Score and non-interest income by the proportion of non-interest income accounted for operating income; this paper measures the effect of non-interest income on bank’s risk and analyzes the empirical results, drawing the conclusion: operating non-interest income business in our county can reduce bank’s risk, but the risk diversification effect is relatively weak. This paper makes reasonable explanation from the point of view of correlation and volatility of non-interest income and interest income. According to the empirical results, this paper put forward policies and suggestions to operating non-interest income and prudential supervision of regulators.