Study On The Mechanism And Effect Of Non-Interest Income Business In Reducing The Risk Of China's Commercial Banks

For a long time,the spread between loan and deposit has been the major income source of China's commercial banks.However,with the processing of the interest rate marketization and the emergence of the Internet Finance,the net interest margin has been narrowed and the traditional loan business has been shrunk.There is an obvious decline in commercial banks' earnings,which means their old profit pattern is no longer sustainable.Therefore,banks realized that they should develop the non-interest income business in order to compensate the drop in the interest income and expand income sources.Because of its low-risk characteristic,the non-interest income business plays an important role in reducing the risk of commercial banks,which makes it more and more popular.Under this background,this paper attempts to explore the influencing mechanism and actual effect of the non-interest income business in reducing the risk of china's commercial banks,so as to provide relevant suggestions to banks in developing the non-interest income business.First of all,the paper gives a general overview of the non-interest income business,including its definition and development.Moreover,the paper analyzes the influencing mechanism of the non-interest income business in reducing the risk of china's commercial banks.Furthermore,the paper collects the panel data from 2009 to 2018 of16 listed banks in china and establishes the fixed effect regression model,so as to clarify whether the non-interest income business can smooth the banks' risk as expected.After the empirical analysis,the paper arrives at the following conclusions.From the perspective of components,raising fee and commission income as well as investment income will decrease the banks' risk,whereas raising other income will increase the banks' risk.From an overall perspective,enlarging the non-interest income can reduce the risk of commercial banks indeed.Finally,based on aforesaid theoretical analysis and empirical results,the paper puts forward corresponding recommendations of developing the non-interest income business.