Research On The Relationship Between Interest Rate Liberalization And Net Profit Margin Of Banks In China

With the deepening of interest rate marketization reform and the rapid development of internet finance,the traditional interest income of commercial banks has been affected.To cope with the challenges brought by the interest rate liberalization and Internet finance development,commercial banks have expanded their intermediary business and combined their financial services with the Internet to improve their efficiency.Since spread income has always been the main source of income for commercial banks,the relationship between interest rate liberalization and commercial bank net interest spread has always been the focus of attention in academia and practice.Studying the relationship between them will help commercial banks to optimize their management and transform business,which has important practical significance.Based on the background of interest rate marketization in China,this paper starts with the H-S market maker model and focuses on the nonlinear relationship between interest rate liberalization and commercial bank net profit spread.It also analyzes how the increase in the proportion of non-interest income and the degree of Internet finance development will further affect the net interest margin income of commercial banks in the interest rate liberalization process.This paper selects the financial data from 36 commercial banks in China from 2007 to2016 as a sample.By constructing the interest rate marketization index as a proxy variable to measure the degree of interest rate liberalization,the dynamic panel model of GMM estimation is used for empirical analysis.At the end of this paper,a robustness test was performed.The empirical results show that there is a positive U-shaped relationship between the degree of interest rate liberalization and the net interest spread of commercial banks.At the same time,in the process of interest rate liberalization,the increase in the proportion of non-interest income will further narrow the net interest margin of commercial banks.The development of Internet finance not only strengthened the narrowing effect of interest rate liberalization on the net interest margin of commercial banks,but also increased the negative impact of the proportion of non-interest income on the net interest margin of commercial banks.The negative relationship between the degree of internet finance development and commercial bank net interest income is even more pronounced.Based on this,this paper suggests that commercial banks should seize the opportunity to carry out financial innovation,adjust the business structure and product structure,and combine with the Internet to improve their operating efficiency,and at the same time establish a risk management mechanism to adapt to future interest rate fluctuations.