Research On The Impact Of Financial Disintermediation On The Profitability Of Commercial Banks

With the development of Chinese multi-tiered capital market and the deepening of the market-oriented reform of interest rates,direct financing instruments such as stocks and bonds and investment products such as funds and trusts have had an impact on the deposit and loan business of commercial banks,and the interest spreads between deposit and loan of commercial banks have narrowed and the ROA levels have declined.At both ends of the bank's assets and liabilities,there has been financial disintermediation.With the continuous deepening of financial disintermediation,the growth of interest net income of commercial banks has been slow and the proportion of non-interest income has been increasing.This paper studies the mechanism and effect of financial disintermediation on the profitability of commercial banks,and proposes that commercial banks should respond to the reform of financial disintermediation.It is a useful supplement to the related research of financial disintermediation,and it provides an important reference for commercial banks to change their profit model.Based on the research on the theory and literature related to financial disintermediation,this article believes that financial disintermediation has both shock effects and correction effects on commercial banks,and divides the profits into interest net income and non-interest income according to the source.The shock effect and correction effect of financial disintermediation on the earnings of these two parts are studied separately.In order to compare the two effects,based on the panel data of 25 listed commercial banks from 2007 to 2017,the ROA of the banks was selected as the explained variable,and the logarithm of the bank's asset size and the cost to income ratio were selected as the control variables.The degree of financial disintermediation is represented by investment disintermediation(ID)and financing disintermediation(FD),and the correction effect on commercial banks is represented by non-interest income ratio(NIIR).Using the product of ID(FD)and NIIR as the explanatory variable(referred to as investment disintermediation cross term and financing disintermediation cross term)representing the final result of investment disintermediation(financing disintermediation)affecting the profitability of commercial banks,this article uses EViews 8.0 to establish an empirical model.If the regression coefficient of the cross term is positive,then the correction effect is greater than the shock effect,and vice versa,the shock effect is greater than the correction effect.In order to confirm the results of the measurement model and further explain the changes in the profitability level and business structure of commercial banks under the dual role of financial disintermediation,this paper uses China Construction Bank(CCB)as an example to decompose the net interest income of CCB into interest income and interest expenditure and the non-interest income(handling fees and commission income)is broken down into traditional intermediate business income and new intermediate business income,which in turn shows the effect on the structure of the interest income and expenditure of CCB and the different types of intermediary business.Taking CCB as a typical example to achieve anti-disintermediation,this paper also puts forward specific suggestions for commercial banks to develop intermediary business and enhance comprehensive service capabilities.The empirical results show that the ROA of commercial banks is negatively correlated with the cross-terms of investment disintermediation and positively correlated with the cross-terms of financing disintermediation.Besides,the absolute value of the regression coefficient of the former is greater than that of the latter,indicating that the comprehensive effect of investment and financing disintermediation on the profitability of commercial banks is that the shock effect is greater than the correction effect.Through the empirical model and case study,this paper draws the final conclusion that the shock effect of financial disintermediation on the profitability of commercial banks is greater than the correction effect.The shock effect mainly refers to that the development of direct financing markets has led to the decline in the profitability of traditional deposit and loan businesses of commercial banks and that the interest cost is increasing due to the expansion of the scale of deposits and withdrawals of fund by peers and other financial institutions.The correction effect mainly means that financial disintermediation forces commercial banks to increase the proportion of non-interest income,promote the coordinated development of traditional intermediate business and new intermediate business,and make the intermediate business income,especially the new intermediate business,become the new profit growth point of commercial banks.