Research on Fragility Modeling and Demonstration of China’s Commercial Bank System
|School||Ocean University of China|
|Keywords||Commercial banking system Banking system vulnerability Sub-prime crisis Granger causality test Suggestions|
With the wave of financial liberalization and globalization, the scope affected by the advent of increasingly frequent outbreaks of the financial crisis is growing, which fully reflects the countries of the world’s financial system’s increasing interdependence and the ability of all countries to defend financial crisis also been declining. As the core of the modern economy and the entire financial system, commercial banks’vulnerability has been more and more concerned as a hot topic.Scholars from all over the world have conducted in-depth study and exploration on how to enhance the stability of commercial banks, and they have given a lot of opinions and suggestions.For China’s commercial banks, on the one hand, with the accession to WTO, elimination of restrictions on foreign banks makes substantial presence of foreign banks in China which intensifies competition in China’s banking industry. Under the conditions that our country’s commercial banks are weak on financial strength, inadequate on capital, not perfect on operating mechanism, unreasonable on management models, shortage on talent pool,it will undoubtedly increase the overall risk and the vulnerability of China’s commercial banks.On the other hand, as the U.S.’ largest trading partner, the U.S. sub-prime crisis broke out not only foreign investment in China’s commercial banks as direct losses, and its impact on China’s macro-economic entities will also spread to China’s commercial banking system.It increases China’s commercial banking system’s overall risk and vulnerability in a certain extent.Under the background, it is significant to study China’s commercial banking system’s vulnerability, determine their trend, analyze the impact of factors, and give rationalized and feasible countermeasures and suggestions to enhance the stability of China’s commercial banking system. For this purpose, this paper first shows details of the vulnerability of bank-related theory and the classical model. Based on drawing on the experiences of domestic and foreign commercial banks to measure the vulnerability of China’s commercial banks,this paper builds up a measurament model.Using 1993-2008 index value carried out by commercial banks as the sample,the empirical research examined the vulnerability of China’s commercial banks and the changes in trends by the change of vulnerability index.Then, this paper investigated the mode of impact from the various indicators in the time dimension on the vulnerability of China’s commercial banks through the time series unit root test, cointegration tests, Granger causality test.Finally.On the basis of all the studies mentioned above, countermeasures and suggestions are made on how to enhance the stability of China’s commercial banking system.