Research On The Impact Of The Reform Ofloan Prime Rate Mechanism On Theoperating Performance Of Commercial Banks

In recent years,the reform of interest rate liberalization in China has been continuously advanced,and the process of interest rate liberalization has been accelerated,and people have paid more and more attention to the changes and impacts brought about by interest rate liberalization.Since the introduction of the LPR(Loan Prime Rate)quotation mechanism in China in 2013,people’s attention to LPR has increased,but the results of this reform have been minimal.In order to further promote the liberalization of interest rates,improve interest rate transmission channels,and reduce cost pressure in the real economy,on August 17,2019,People’s Bank of China issued the "People’s Bank of China Announcement No.15" to reform the LPR quotation formation mechanism.The reform of the LPR quotation mechanism is deeper and more intense than the introduction of the LPR quotation mechanism in2013,and the mechanism is more perfect.Therefore,it is very important to study the impact of the reform of LPR formation mechanism on China,especially the impact of the reform of LPR quotation mechanism on commercial banks,which has more important theoretical and practical significance.By referring to a large number of references,this thesis uses the General Differences-in-Differences method to study the impact of the loan market quoted interest rate mechanism reform on the business performance of commercial banks.First,this thesis summarizes and compares the studies related to interest rate liberalization,loan prime rate mechanism reform,and commercial banks’ business performance evaluation methods,etc.By organizing the literature,we find that the theoretical studies on the impact of loan prime rate mechanism reform on commercial banks account for most of the studies,and there are relatively few empirical studies.Therefore,this thesis chooses to adopt a combination of theoretical analysis and empirical research to enrich the research in this area.Second,based on the relevant theories about interest rates and bank performance management,the impact effects of the loan prime rate mechanism reform on commercial banks’ business performance are analyzed,while the intermediate impact mechanisms are explored.The current situation analysis section provides a detailed analysis of the current situation of loan prime rate mechanism reform and commercial banks’ business performance,respectively,and summarizes their characteristics.Finally,on the basis of theoretical analysis,this thesis selects the annual data of a total of 63 A-share and Hong Kong-share listed commercial banks from 2014-2021 as samples,constructs an evaluation system of commercial banks’ business performance using factor analysis method,and then applies the General Differences-in-Differences method to study the impact of loan prime rate mechanism reform on commercial banks’ business performance,and studies the impact on commercial banks’ business performance according to the nature of property rights and size to classify and study the heterogeneity of property rights and size heterogeneity by sample.In addition,this thesis examines the mediating effect of the loan prime rate mechanism reform on the level of commercial banks’ operating performance through the non-performing loan ratio and competition degree channels.Finally,the conclusions of this thesis are as follows:(1)The loan prime rate mechanism reform has caused a significant impact on commercial banks’ operating performance,Other words,the reform of the loan prime rate mechanism reform has reduced the operating performance of commercial banks.This is caused by the short time of policy implementation and the fact that commercial banks have not yet made changes and adjustments within a short period of time.(2)The reform of the loan prime rate mechanism has a negative impact on the business performance level of commercial banks by increasing the non-performing loan rate and expanding the degree of competition.(3)The reform of the loan prime rate mechanism has different degrees of impact on the operating performance of banks with different property rights and different sizes.In general,the impact of the reform of the loan prime rate mechanism on Joint-equity commercial banks and urban commercial banks is more significant;compared with large commercial banks,the impact of the reform of the loan prime rate mechanism on the operating performance of medium-sized and small commercial banks is more significant.Based on the results of theoretical analysis and empirical research,this thesis puts forward targeted recommendations at the bank and government levels,respectively.This thesis argues that commercial banks should focus on improving their core competitive capabilities,changing their revenue structure,which is dominated by interest income,and improving their ability to set their own prices and prevent risks.Different types of banks should also find their own strengths and stand firm in the reform.Regulators should promote a sound risk supervision and management system.Strengthen the supervisory control over the level of interest rate risk of commercial banks,shrink the cost of commercial banks’ liabilities,and continue to promote the reform of the loan prime rate mechanism quotations to produce more obvious and prominent effects in the work of shrinking the financing costs of the real economy,and further promote the sound and rapid development of the real economy.