Research On The Business Models Of China’s Banking Industry Under Spillover Effects Of External Financial Stress

With the development of trade globalization and financial integration,how to resist the impact of transnational financial risks has become a common challenge faced by governments around the world.As an important measure of reform and opening,the continuous improvement of China’s financial openness has made the impact of the overseas financial environment on the security and stability of the domestic financial system more complicated and uncertain.And how to prevent and resolve external financial shocks in the process of opening up is an important research topic for China’s banking sector which as the most important part of China’s financial system.Therefore,studying how to correctly identify external financial risks and clarify the mechanism from the micro perspective of bank is of great significance to resist external financial stress spillover and prevent financial systemic risks.This paper takes 107 Chinese commercial banks as research samples from 2011 to 2018.We chose three asset structure variables and three liability structure variables and used k-medoids clustering analysis to divide the sample banks’ business model into three categories: traditional,specialized and investment.Traditional model have a higher proportion of loans and advances to customers in the asset structure and rely on deposit and short-term funding.Specialized model have a higher proportion of loans and advances to banks in the asset structure,and rely more on deposit and short-term funding.Investment model have a higher proportion of investment assets in the asset structure and account for a higher proportion of long-term funding,transaction liabilities and other unstable liabilities in the liability structure.On the basis of dividing the banking business model,we further examined the impact of external financial stress on the China’s banking sector and its difference among business models.The results show that external financial stress has a significant impact on the China’s banking sector,it through capital to asset ratio,return on assets and income volatility to affect the banks’ individual risk.The increase in external financial stress not only reduces banks’ capital to asset ratio and return on assets,but also increases banks’ income volatility,and thus increase banks’ individual risk.Further research also found that investment model that rely more on securities trading activities are more susceptible to external financial stress.And shadow banking is an important business factor for this type of business model.Through the above analysis,we believe that the supervisory authority should incorporate the banks’ business model into supervisory measures for better management.Secondly,the supervisory authority should orderly guide the banking industry in resisting financial stress spillover.We should pay attention to the impact of cross-border financial risks and improve the banking industry’s ability to withstand overseas financial risks.Finally,the regulatory measures for the shadow banking business of commercial banks urgently need to be promoted.