Research On The Influence Of Financial Derivatives Transaction On The Stability Of Commercial Banks

With the deepening reform of interest rate and exchange rate system liberalization in China,domestic enterprises began to find ways to avoid the risks caused by the fluctuations of interest rate and exchange rate in order to cope with them.Derivatives quickly became a financial tool that companies used to hedge their risks.At the same time,under the background of global financial liberalization process accelerating,margin of space is narrow for the commercial bank to make a profit,the traditional business model has not applicable to the competition between Banks.Banks try to increase their income sources and to evade the various risks faced,start looking for a new financial tool,then use financial derivatives.Commercial banks can not only effectively manage various risks through hedging in financial derivatives related transactions.Moreover,it can improve the operating performance by reducing the cost of banks.However,in the continuous development of financial derivatives,its disadvantages are gradually exposed.Because financial derivatives have derivative characteristics and leverage effect,if the bank conducts improper operations,it will bring huge losses.Therefore,in this context,it is significant to analyze the influence of financial derivative instrument on commercial banks’ stability.This thesis studies the stability of banks from the two perspectives of bank profitability and risk level.The rise of bank profitability or the decline of risk level represents the improvement of bank stability.On the contrary,the decrease of bank stability is manifested as the decrease of profitability or the increase of risk level.In the research of this thesis,firstly,it proposes the research significance and background of the subject and sorts out the related literature research.Secondly,it sets forth some basic theories associated to the financial derivatives,and analyzes the influence mechanism of financial derivatives on the stability of commercial banks from two perspectives of profitability and risk level.Then,it analyzes the trading status of financial derivatives in China CITIC Bank,and summarizes the problems existing in financial derivatives.Then,the panel data model is constructed based on the annual data of16 commercial banks from 2011 to 2020.Empirical analysis is made from two aspects of bank profitability and risk level,and derivatives are subdivided into interest rate and foreign exchange,respectively,to study their influence on the stability of commercial banks,and the general conclusion of the whole sample is drawn.On this basis,compared with CITIC Bank,the gap between CITIC Bank and the overall commercial banks is analyzed,and the personalized characteristics of financial derivatives transaction of CITIC Bank are summarized.Finally,the thesis summarizes and puts forward relevant policy suggestions: expanding the scale and variety of derivatives;strengthening the construction of professionals in derivatives;strengthening the internal risk management of bank derivatives;making full use of financial technology;and strengthening external supervision of derivatives.