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The Empirical Study on the Determinants of Net Interest Margin in the Chinese Banking System

Author: ZhangYuHong
Tutor: ZhangZongYi
School: Chongqing University
Course: Finance
Keywords: Commercial bank Net Interest Margin Spread level Factors
CLC: F832.2
Type: Master's thesis
Year: 2011
Downloads: 241
Quote: 0
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Abstract


Banking net interest margin is defined as the bank's net interest income and total bank assets or earning assets ratio, can better reflect the bank's management and profitability, but also the bank's own funds transaction process pricing behavior results. And factors influencing the level of net interest margin due to the various national financial environment and the different interest rate policy there is a big difference in the implementation of China's financial industry sub-sector management, financial innovation and development is not enough, intermediary business is restricted, net interest margin income is the main source of bank profits . With China's market-oriented interest rate reform, commercial banks at the central bank's benchmark interest rate required based on the situation on their own business deposit and loan interest rates for a certain degree of float, but the ability of commercial banks to independent pricing has not been fully realized. Meanwhile, foreign banks, small and medium joint-stock banks and city commercial banks in large numbers, the banking industry is facing major changes in the financial environment, therefore, study the new environment, the impact of China's banking net interest margin factor is crucial. In this paper, NIM structural model analysis of China's banking industry since the interest rate reform issues since the level of net interest margin, on this basis, taking into account operating costs, non-spread income, non-traditional assets and the central bank benchmark interest rate and other factors, select 2000 - 2008 China 23 commercial banks as the research object, using the static panel data estimation and dynamic estimation are two methods of commercial banks net interest margin each factor and the relationship between the empirical analysis. Meanwhile, the paper selected 15 listed banks and 26 non-listed banks, the use of an unbalanced panel data estimation statically examines different types of Chinese commercial banks net interest margin impact factors exist differences. Study found that four state-owned banks persistently low net interest margin, net interest margin volatility smallest city commercial banks net interest margin remained persistently high net interest margin the most unstable. The empirical results show that the impact of China's banking net interest margin factors: risk aversion, operating costs, credit risk, non-spread income, non-traditional assets, the benchmark interest margin and net interest margin last year, the opportunity cost of reserves and assets In the static and dynamic models of the findings are inconsistent. Among them, the operational costs associated with the negative net interest margin, which differs from previous research findings; credit risk, non-spread income, non-traditional assets and benchmark spreads are positively correlated with net interest margin, suggesting that financial innovation of commercial banks net interest margin of increasingly apparent, state the interest rate policy of commercial banks operating and profit management influence. In addition, risk aversion, operating costs, non-spread income and non-traditional assets of listed and non-listed banks net interest margin of banks are different. Based on research findings, this paper considers Chinese commercial banks should strive to maintain a reasonable level of banking net interest margin, and further improve the ability of commercial banks to independent pricing.

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CLC: > Economic > Fiscal, monetary > Finance, banking > China's financial,banking > Banking system and business
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