Analysis On The Impact Of Non-interest Income On The Commercial Bank's Operation Risk In China

As the pace of continuous reform of the financial markets and the drastic competition between banks,commercial banks reform the traditional profit model dominated by interest income gradually,promote diversified business structure,and develop non-interest income vigorously.In recent years,non-interest income has taken an increasing proportion overall operating revenue,and different activities correspond different risk level,whether increasing of non-interest income causes positive or negative effects on operation robustness needs to be discussed.Therefore,there is a theoretical and practical significance to further study for promoting non-interest income in China.This essay selects quarterly financial statement of five major commercial banks from 2007 to 2015,in order to analyze the development of non-interest income and the influence of operation risk.The main causes of choosing the five major commercial banks are that this business' development scale and degree optimizes and its risk control ability becomes maturity.The five major commercial banks established earlier,got coverage widely,has advanced technology and professional talents,also has business reputation and brand effect,which provide basic support for non-interest income development.At present,with our country began to relax the decentralized management policy,the improvement of financial environment and innovation of technology,the financial disintermediation becomes highlighted,and the reform of marketization of interest rate carries forward.Not only the physical banks,but also the supervision departments take supportive attitude to increase non-interest income.Based on the above background,this paper firstly analyses the existing literature domestic and overseas,expounds the three periods of development of Chinese commercial banks' non-interest income and corresponding risks,and according to characteristics to define this concept.After that,it combs its own risks.Later on,this essay analyzes the proportion and composition of non-interest income using the income statement for nearly nine years of five major commercial banks,and divides it into two components,commission fee and other non-interest income.It utilizes non-interest income and interest income growth rates tocalculate the volatility and correlation.In addition,it applies z-score to measure bankruptcy risk in the core part of this paper.This article takes Bank of China,China Construction Bank,Agricultural Bank of China,Industrial and Commercial Bank of China and Bank of Communications from 2007 to 2015 as research objects,through empirical test to examine the relevant impact between two types of non-interest income and operation risk.Through the combination of qualitative and quantitative analysis,this paper draws the conclusions:(1)Although the non-interest income in our country has developed rapidly,the scale expands unceasingly,the ratio in operating income is still in a lower level.(2)Commission fee has been in a dominant position,depending too much on pure play.(3)The correlation between non-interest income and net interest income is low,whereas the volatility of non-interest income is significantly higher that net interest income.(4)Commission fee can significantly reduce the operation risk in commercial banks,and other non-interest income can reduce the risk in commercial banks to a large extent.To sum up,at this moment,our country should vigorously carry out non-interest business,which will not only improve the overall revenue,but also reduce the risk.However,it should not be pell-mell developed.Banking union should clarify the potential risks of this business,in accordance with their own conditions balancing non-interest income with the traditional one reasonably,so as to enhance profitability and minimize risk.Accordingly,this essay puts forward several relevant suggestions to further develop non-interest income from three aspects.