The effect of interest rate liberalization on the risk of commercial bank failure in China--analysis of panel data of 16 commercial Banks

• 1、School of Economics and Business Administration, Chongqing University, Chongqing 440044

Abstract：In recent years, with the advance of interest rate liberalization, the interest rate spread between deposits and loans of China\'s commercial Banks has been narrowing while the volatility has been increasing, which has directly increased the bankruptcy risk of commercial Banks.This paper thinks that net interest margin as proxy variable of interest rate marketization, can effectively reflect the direct effects of interest rate marketization of commercial Banks under, and then build the comprehensive to reflect the change of interest rate marketization of interest rate marketization index.Finally, this paper takes 16 commercial Banks in China in 2006 ~ 2016 data as sample, building dynamic panel GMM model, empirical analysis on the marketization of interest rate on the influence of our country commercial bank bankruptcy risk and credit risk.The results show that the marketization of interest rate actually contributed to the our country commercial bank bankruptcy risk, the bank itself characteristics variables (capital adequacy, LDR, cost income ratio, return on total assets, net interest income ratio) is the important factors affecting its bankruptcy risk.

Keywords： Finance Financial liberalization Net interest margin.Bankruptcy risk Dynamic panel