Nonlinear Effect On Bank Performance Of Non-interest Business

Under the new normal of economy,commercial banks have developed non-interest business as an important strategy for business development.Generally,the research of foreign professors show that they have hold a cautious attitude towards the development of non-interest business although they have been hold a positive attitude towards it before.Chinese scholars have also been paying more attention to the different kinds of effect on bank performance by the proportion of non-interest business for different types of commercial banks.This paper tests the nonlinear effect on bank performance of the non-interest business by the financial data of 51 commercial banks during 2008~2016.The specific study is devided into two parts.Part one,using panel threshold model developed by Hansen,this paper tests the nonlinear effect on bank performance of the non-interest business.The results show that there are threshold effects between the non-interest business and bank performance.Taking the scale of assets is 265080.6616 million yuan as a dividing line,the scale of the non-interest business and bank performance is negatively related for small-and-medium-sized banks,but positively related for large banks.Part two,we adopt the method developed by Lepetit et al.using standard deviation as the indicator of the volatility of bank performance,to analyze the nonlinear effect on volatility of bank performance of the non-interest business by the model of quadratic form.The results show that there are nonlinear effects on volatility of bank performance of non-interest business.The proportion of non-interest business is negatively related for the stability of bank performance,but when it has reached a critical point,then the proportion of non-interest business is positively related for the stability of bank performance.Therefore the department concerned should pay great attention to the nonlinear effect on bank performance of non-interest business while drawing up a blueprint of the development of our banking system to avoid simply using the stereotyped practice of foreign countries or to pursuit for a dramatic growth of scale of non-interest business in a crude way.We suggest that large banks should take advantage of their rich resources to increase the scale of non-interest business such as developing new financial business to improve bank performance as well as to resist the risk of a decline in returns,however small-and-medium-sized banks should concentrate resources on the traditional savings and loan business.