The Analysis Of The Causes Of Rural Banks Fragility In Guangdong Province

As a new rural financial institutions in our country, rural Banks added new vigor for our rural financial market system, improved the fraction of coverage of financial institutions in rural areas, reduced the inadequate competition of rural financial market and other issues. However, the rapid development of rural Banks also exposed many problems, such as the conflict between the legal responsibility for supporting agriculture and profit responsibility, limited sources of funds, hardware and software can’t meet the demand of operation and so on. These problems in some degree weakened the competitiveness of rural Banks in rural financial market, and increased the degree of fragility. For the Chinese rural economy which is in transition period, studying the causes of rural banks fragility and finding out the governance path is very important. The purpose of this article is based on the analysis of the problems of rural banks using the method of Analytic Hierarchy Process to discuss the reason of its fragility, find out the main influencing factors, and examine its fragility degree.Then draw lessons from foreign financial institutions to explore the governance path,in order to better serve the rural economy.On the basis of clearly defined the concept of “rural banking fragility”, this paper research the causes of rural banks fragility from the perspective of internal. In this paper, the main contents included: firstly, the paper introduces the research background, and summarized the related literature of rural banks, then determine the aim of this article. Secondly, summarized the theory of financial fragility, as the theoretical basis for this article.Thirdly, analyzed the causes of rural banks fragility.Fourthly, using the method of AHP to analyze the degree of the rural banks fragility. Fifthly, study foreign microfinance technology and community bank development experience, for the methods to reduce vulnerability. Sixthly, according to the results of theoretical analysis and empirical analysis, this paper raise some suggestions to reduce the degree of the rural banks fragility.Through research, this paper come to a conclusion: on the basis of the analysis of rural banks fragility degree, the situation of rural banks in Guangdong province are not optimistic, generally in a state of fragility of high degree. From the internal perspective, asset quality, capital adequacy, and profitability are the main aspects affecting the rural banks fragility. in contrast, the liquidity has little effect on the rural banks fragility.For the specific indicators, the main factors that affecting the rural banks fragility are the non-performing loan ratio, capital adequacy and set aside coverage.the non-performing loan ratio were weighted largest.Additionally, operating expense ratio,core capital adequacy ratio, top ten customer loan proportion, cover ratio and capital profit also have a margin impact on rural banks fragility. Therefore, controlling the non-performing loan ratio is the key of reducing the fragility of rural banks.At the same time, improving the operational efficiency of rural banks and selecte the customers scientificly is an effective way to reduce their fragility.