The Impact Of Interbank Business On The Firm Financing And Bank Risk In China

Interbank business refers to the wide business cooperation and mode innovation between the commercial bank and financial institution.By transferring the loan assets into the interbank assets in balance sheet,commercial banks can save venture capital and increase lending.In the past decades,interbank business is no more than a business of capital allocation and liquidity management,the business mode is designed to get rid of the stale and bring forth the fresh.Interbank business has experienced an explosive growth and has grown to be means of making profit and regulatory arbitraging especially in 2011 and 2012.However,because of the characteristic of regulatory vacuum and duration mismatch itself,China Banking Regulatory Commission issued "Notice about Regulation of Inter-bank Business for Financial Institutions(NO.127)" and "Notice about standardize trade business of commercial bank management(N0.140)" in 16th May 2014,leading to strict controls on the interbank business and made it die out gradually.From then on,the interbank business has changed from the savage growth stage to the steadily shrinking stage.The non-standard business change the operation mode of bank and meet firm financing needs.Review the development of interbank business,Rethink the theoretical basis and origin of its flourish,Analyze the business forms and profit-making mechanism in depth are of great value to the future direction of regulation and the transformation of commercial bank.It will also indicate the way of reforms with regard to the interbank business to cater the needs of real economy in a better way.This paper will focus on the following questions:First,what are the driving factors of the rapid development of interbank business?Why researchers are neatly divided over these business modes?Second,how the interbank business affect the corporate financing constraints?Do these business modes have the necessity to exsit?Third,what's the impact of the interbank business on bank management?Will these modes lead to bank risk taking?What's the real risk point of the interbank business?To study these questions,theoretical deduction and empirical test have been used.The results show that:(1)Regulation for the interbank business is the main causes of interbank business flourish,Regulatory arbitrage is the essential purpose of this innovation.(2)With the help of mathematical model,to a large extent,the interbank business is a helpful method for enterprises to obtain financing funds and such effect is more significant in the downturn period,which means that the interbank business has a significant counter-cyclical characteristics and is a valuable supplement to traditional bank services.(3)When controlling the finance and economic development degree of areas,the risk-taking behavior of commercial banks does not have a direct relationship with interbank business.But constantly alertness should be pay on the potential threats and damages that the new business may bring,interbank business exacerbates the balance sheet mismatch of commercial banks and a raising amount of the funds is financed to the Real estate enterprise abandoned by the existing policies,which may induce money shortage and much higher financing costs.