Research On The Relationship Between Competition And Credit Risk Of The Banking Industry In Chongqing

In recent years, the banking industry has realized rapid development. New banking institutions have set up unceasingly. Banks have been expanding and various banking institutions are vying to set up branches, expand the scale and to increase profits. The Eighteenth National Congress of the CPC also proposed the strategy of accelerating the development of private financial institutions. The social voice that requires to ease bank access and to strengthen the financial competition is louder and louder. However, the bank institutions reflect that the competition is increasingly fierce and it’s hard to put loans. At the same time, the theory and the reality cannot agree with each other with the relationship between competition and risk. But the relationship between the two, without doubt, will influent regulators making policies and market players developing strategies.Therefore, based on summarizing the literature review of competition and its measure theory, theoretical and empirical research on the relationship between credit risk and competition, this paper first introduces the basic situation of banking industry and the competitive landscape in Chongqing and then by using the competition measure theory, selects several commonly used measure index to measure and analyze the competition of major banks in Chongqing. Secondly, this paper analyzes the credit risk of banks in Chongqing area from the perspective of the non-performing loan rate and the rate of overdue loans. Finally, taking the banking industry in Chongqing as an example, this paper studies the relationship between the competition degree and credit risk of banking industry, based on the unbalanced panel data of 22 commercial banks in Chongqing from 2007 to 2014.The results show that there is a negative correlation between the degree of competition in the banking industry in Chongqing, and the bank credit risk. This conclusion supports the hypothesis of competition- stability.On this basis, this paper put forward relevant suggestions for making banking regulatory policies, clearing and planning development strategies.