No abstract

No abstract

We investigate the effect of ownership structure on banks’ capital buffers with a method of System GMM, for a sample of main commercial banks in China. The increase of ownership concentration can promote the buildup of capital buffers, while implicit guarantee from government can reduce this effect for the systemically important banks. The relative lower ratio of interbank deposit to total deposits weaken the supervision from peer banks for the accumulation of capital buffers. Adequately increase the ratio of major shareholders, accelerate the development of interbank deposit market and reduce government implicit guarantees are very essential for Chinese financial stability.

For the deeply impacts of China’s banks stability on itself and world economy, we use dynamic GMM method to investigate the nonlinear relationship between banks competition and their stability. When competition is lower than certain level, the “competition-stability” comes into existence, otherwise “competition-fragility” holds on. The stock market disaster in 2015 does not have significant influence on the z-scores of banks, but it caused the non-performance loans increase evidently. The separate supervision and separate operation of financial industry may be the main reasons for the above results. China should take some actions to maintain appropriate competition for the stability of its banks system.