Bank Of China Research Articles

Two‐stage credit risk prediction framework based on three‐way decisions with automatic threshold learning

AbstractCredit risk prediction is a binary classification problem. Using two‐way decisions to classify defaulters may lead to decision errors due to insufficient information. To solve this issue, in addition to identifying borrowers as defaulters and nondefaulters, this paper introduced the delay‐decision mechanism in three‐way decisions, so that records acquiring more information do not make decisions immediately. A two‐stage credit risk prediction framework based on three‐way decisions was proposed to reduce decision risk. In this framework, the decision cost values of three‐way decisions were simplified by analyzing the credit risk prediction, and the expression of threshold calculation was also modified. An optimization objective was built according to the trade‐off between information gain and decision cost, and the particle swarm optimization algorithm was applied to learn the decision thresholds. After adding more supplementary information, the samples in the delayed‐decision region were made further decisions. A dataset from a commercial bank in China was employed to conduct experiments, and the results demonstrated that our proposed method outperformed various base classifiers.

Can setting up inside debt accelerate the bank's digital transformation? Evidence from China

PurposeDigital transformation is essential for commercial banks to maintain long-term competitiveness in the digital economy era. This study aims to investigate the relationship between inside debt and the bank's digital transformation.Design/methodology/approachThis study set up a quasi-natural experiment based on implementing the executive compensation deferral system in the Chinese banking industry. Using the annual panel data of 180 commercial banks in China from 2007 to 2021, this study employed the difference-in-differences (DID) method to conduct an empirical analysis.FindingsThis study confirms a significant statistical relationship between inside debt and the bank's digital transformation, and managerial myopia is the transmission channel of inside debt affecting the bank's digital transformation. Furthermore, the development of Internet finance and the enhancement of bankers' confidence will improve the contributions of inside debt to the bank's digital transformation.Originality/valueThis study contributes to the literature on inside debt and the bank's digital transformation. It has specific policy value for the scientific design of the banking compensation mechanism and accelerating banks' digital transformation.

The Asset Pricing Implications of Ambiguous Central Bank Communication: Evidence from China

ABSTRACT This paper investigates the premium of ambiguous central bank communication with diversified policy stances on the cross-sectional asset prices. Distinguishing different inclinations (dovish, neutral and hawkish) in the communications of the People’s Bank of China (PBC) governors through a field-specific lexicon approach, we construct the ambiguous communication index (ACI) based on the textual methodology. We find that ambiguous communication makes it difficult to predict policy stance and increases policy uncertainty, thus the ACI earns a significant negative premium in the cross-section of asset pricing. This paper contributes to the literature on policy uncertainty by proposing a new supplementary perspective, a feasible measure and empirical evidence of ambiguous communication. Furthermore, this contribution extends to the literature on policy communication by distinguishing the statistically and economically significant premium linked to ambiguous communication.

Can Green Finance Reform and Innovation Pilot Zones Promote the Operational Efficiency of Commercial Banks? — Empirical Research Based on 40 Commercial Banks in China

The Chinese government is placing significant emphasis on green development. From 2017 to 2021, the central and local governments in China established 9 green finance reform and innovation pilot zones in 6 provinces to explore the pillars of China’s green finance system. Although these zones and related policies have been proven advantageous for innovative manufacturing enterprises and environmental quality, the impact on commercial banks, pivotal players in China’s green finance landscape, has been understudied. This paper employs the DEA-Malmquist and DID models to investigate the impact of pilot zones on the operational efficiency of commercial banks. The results indicate that the establishment of pilot zones significantly improves banks’ operational efficiency, and the mechanisms are reducing non-performing loan rates and increasing green credit balance. In addition, state-owned banks have benefited more. Further research shows that the improvement mainly comes from increased pure technical efficiency, due to better management practices and resource utilisation. These findings can be used to evaluate the impact of the government’s green finance policy on the operation of commercial banks.

Research on Credit Risk Evaluation In Commercial Banks In China

Credit loans of Chinese commercial banks have been increasing; however, the risk of loan default is also rising rapidly, and Chinese commercial banks have been paying more and more attention to the management of credit risk, and that leads to the commercial banks’ exploration of the credit risk evaluation. Moreover, data mining and mathematical statistics techniques are applied in credit rating, risk monitoring, and prediction of customer default risk.

The impact of monetary policy interventions on banking sector stocks: an empirical investigation of the COVID-19 crisis

The enduring impact of the COVID-19 crisis on the financial sector is undeniable, persisting far beyond the eventual waning of the pandemic. This research examines central bank interventions during the pandemic, using a quantitative event study approach over a five-day window to analyse the impact of 188 monetary policy announcements on banking stocks in China, the U.S., and Europe. Our results demonstrate how monetary policy announcements targeting different economic mechanisms have produced a diverse market reaction throughout the COVID-19 pandemic. Namely, cuts in interest rates and the maintenance of a low interest rate environment by the Federal Reserve resulted in negative abnormal returns in the U.S.A., while short-term announcements surrounding intra-day credit and liquidity provisions boosted banking sector stock prices. In Europe, a muted reaction by the banking sector was observed, with negative abnormal returns observed in response to the ECB’s 2% inflation objectives. Finally, banking stocks in China responded strongly and positively to foreign currency and exchange-related announcements by the People’s Bank of China. The results and insights from this analysis can thus inform preparations made by policymakers, governments, and financial market stakeholders in the event of future waves of COVID-19, or further extreme societal disruptions.

Assessing the Complex Interplay of China’s Fertility Policy Adjustments and Female Employment Dynamics: An In-depth Analysis of the Digitalized HRM Landscape in the Age of AI and Big Data

The fertility policy adjustments are occurring against a backdrop of rapid technological advancement, characterized by the integration of big data analytics and artificial intelligence (AI) into human resource management (HRM) practices. In the banking sector, as in many other industries, the adoption of these technologies has become increasingly pervasive. This study explores the intricate relationship between fertility policy adjustments, the integration of big data and AI in HRM practices, and employee satisfaction within China's banking sector. In response to evolving demographic and technological landscapes, the research aims to uncover how fertility policy adjustments influence female employment dynamics, the adoption of big data and AI in HRM, and ultimately, employee satisfaction. Utilizing a quantitative research design, structured surveys were administered to female bank employees. The resulting data were rigorously analyzed using the Statistical Package for the Social Sciences (SPSS). The study underscores the practical significance of optimizing HR technologies, particularly big data analytics and AI, for enhancing both HR functions and employee satisfaction. It also emphasizes the importance of data-driven HR practices and predictive employee retention strategies as crucial tools in creating responsive and supportive work environments. Additionally, this research contributes to HRM theory by recognizing the pivotal role that technology integration plays in shaping modern HR strategies and organizational success. While acknowledging its limitations, this study lays the foundation for future research, including studies that are longitudinal, comparative, and qualitative studies, to offer a more comprehensive understanding of the complex dynamics in the contemporary workplace.

China’s Belt and Road Initiative (BRI) and its role in developing Africa’s economies. Case study: Kenya’s Standard Gauge Railway (SGR), Kenya

The main purpose of this paper is to study the potential economic benefits of China’s Belt and Road Initiative (BRI) to Africa’s economies with case study of Standard Gauge Railway (SGR) project in Kenya. China has become an important factor in African development. Through the Belt and Road Initiative (BRI), it is reorganizing the geographical and political space in the Africa, first, by heavily investing in regional connectivity projects, and second, by promoting alternative ideas and concepts of development favourable to a Chinese-centric order in the region. The paper also argues that the BRI is actively shaping a new spatial order in Africa by influencing key stakeholders’ perspectives and preferences. China’s particular visions of global and regional development through the BRI are gaining traction in Africa, making it an indispensable actor with considerable political and economic influence – and thereby challenging the role of traditional development partners in the global south region. China’s engagement with Kenya is a good example of how Beijing approaches economic diplomacy in Africa. Moreover, it’s a revealing case study of how BRI works on the continent. Kenya needs better infrastructure to meet its development needs, and China has been willing to help. The project to upgrade the Standard Gauge Railway (SGR) is China’s flagship investment project in Kenya. The SGR connects Mombasa, the largest port city in Kenya, to its capital, Nairobi. The Export-Import Bank of China financed 90 percent of the SGR project, while the Kenyan Government contributed the other 10 percent. The China Road and Bridge Corporation led the SGR installation process. This was supposed to signal a contribution to Kenya’s developmental goals and directly spur growth in the construction sector. The Standard Gauge Railway (SGR) is a mega project that the Kenyan Government has invested in after freedom from the colonial rule. The SGR created around 30,000 new jobs for locals and, in the first year, transported 5.4 million passengers and 1.3 million twenty-foot equivalent units (known as TEUs) of shipments across Kenya. If this performance had continued African exports would have increased significantly. The chief economist in the State Department of Infrastructure in the Kenyan Ministry of Transportation and Infrastructure claimed that the SGR would increase trade and investment and further employment opportunities to enhance the people’s livelihoods in the East African Community. The paper will analyze how the BRI through SGR has enhanced economy and trade for Africa with a case study of Kenya, how the SGR has reduced unemployment, how the SGR has enhanced both the social aspects and environmental conservation in Kenya. This paper will also reveal that the Standard Gauge Railway (SGR) and BRI have massive economic value to Africa and beyond and are crucial to development. The study recommends the completion of the remaining SGR phases in Kenya in the projected time frame for the railway industry to play a positive role in national and continental development.

Research on the Coordination of Bank Capital Adequacy Ratio and Monetary Policy

Capital adequacy ratio and monetary policy are important control measures of financial supervisory authority and monetary authority, respectively. The effective coordination of the two has greatly affected the effectiveness of monetary policy. The article selects the annual data of 16 listed commercial banks in China from 2003 to 2018, and studies the impact of capital adequacy ratio on monetary policy transmission by constructor. listed commercial banks in China from 2003 to 2018, and studies the impact of capital adequacy ratio on monetary policy transmission by constructing a panel regression model. The results show that large state-owned commercial banks play a major role in bank credit channels for monetary policy, and banks with higher capital adequacy ratios are more likely to have a higher capital adequacy ratio. The results show that large state-owned commercial banks play a major role in bank credit channels for monetary policy, and banks with higher capital adequacy ratios are more vulnerable to monetary policy shocks. In addition, the external capital constraint of minimum capital adequacy will cause a multiplier effect when monetary policy is transmitted through credit channels. The multiplier effect produced by joint-stock commercial banks is much smaller than that of large state-owned banks. The multiplier effect produced by joint-stock commercial banks is much smaller than that of large state-owned banks. Therefore, financial supervisory departments must fully consider the interference caused by the capital adequacy ratio on monetary policy, strengthen policy coordination, and unblock the transmission mechanism of Therefore, financial supervision departments must fully consider the interference caused by the capital adequacy ratio on monetary policy, strengthen policy coordination, and unblock the transmission mechanism of monetary policy.

Is the “Lehman Crisis” Reappearing

On March 7, 2023, Silicon Valley Bank (SVB) announced that it is honored to have been named the best bank in the United States by Forbes magazine for five consecutive years. Dramatically, three days later, it collapsed within 48 hours due to insolvency, causing a huge uproar and becoming the largest bank failure in the United States since the 2008 financial crisis. This case firstly introduces SVB and its unique business model, outlines its process of suffering from severe runs and ultimately leading to bankruptcy after monetary policy changes, and states its series of subsequent impacts on the global economy after bankruptcy. Next, analyze the reasons for the bankruptcy of SVB from two aspects: the deficiencies in its own risk control and the lack of supervision from internal and external regulatory departments. Finally, by reviewing the entire process of the bankruptcy of SVB, we can obtain the enlightenment for China's banking industry and financial regulatory agencies from this incident.

Research and Analysis on the Development Strategy of Investment Banking Business of Commercial Banks in China

Against the backdrop of the growing financial industry, the development of investment banking has become an inevitable trend for commercial banks, and certain results have been achieved so far. However, in recent years, there are some issues regarding the development of investment banking business operations in commercial banks identified in the study, such as insufficient product innovation and insufficient business risk management capability. This paper analyzes the environment using the "PEST" analysis. Finally, the development direction is summarized by sorting out the development status, problems and reasons, enhancing innovation capabilities and borrowing the power of fintech can all provide good ideas for commercial banks to develop their investment banking business. This paper can provide ideas for other commercial banks facing the problem of developing investment banking business.

The Road of Banking Innovation and Development: Taking Shenzhen Qianhai We Bank as an Example

With the continuous evolution and reform of the financial market, private banks, as a new type of financial institution, have increased the diversity of the financial system. To better meet the needs of customers, private banks have expanded innovative business models and technology applications, promoted the competitiveness of the financial market, and improved the efficiency of financial services. This article concentrates on the operation pattern of Shenzhen Qianhai WeBank and uses the SWOT analysis method to analyze the advantages, disadvantages, challenges, and opportunities in its operation process, also finds out the differences between traditional banks and emerging Webanks and puts forward suggestions for bank operation mode. Shenzhen Qianhai WeBank is currently the leader of Internet banks in China, and it also ranks first among private banks in terms of its asset scale and the number of customer groups. The study of Shenzhen Qianhai WeBank bank can shed light on the innovative operating model for banks from its powerful Internet technology gene, excellent financial linkability, and diversified ecological cooperation.

Financial Openness, Bank Systematic Risk, and Macroprudential Supervision

International experiences have underscored the dual implications of financial openness. Given China’s unique circumstances and its escalating level of financial openness, it is crucial to assess potential impacts on the country’s bank systemic risk. This paper uses the quarterly data of 37 listed banks in China from 2010 to 2022 to explore the relationship between financial openness and systemic risk of the banking system, the mechanism of action, and the moderating effect of macroprudential policy on the two. The findings indicate an inverted “U”-shaped correlation between financial openness and bank systemic risk. On one side of this shape, financial openness primarily exacerbates funding mismatch, thereby increasing the systemic risk of banks. Conversely, on the other side, it primarily alleviates systemic risk by optimizing capital management. Moreover, with the help of macroprudential supervision, the inverted “U”-shaped relationship between financial openness and bank systemic risk leads to a lower level of systemic risk and, at the same time, promotes the early arrival of the inverted “U”-shaped inflection point between financial openness and bank systemic risk. Notably, the impact of financial openness on the systemic risk of joint-stock commercial banks, urban commercial banks, and rural commercial banks is more significant. The above research results provide a regulatory reference for effectively preventing and resolving systemic risk while achieving high-quality openness to the outside world. In deepening financial openness, the banking industry needs to pay attention to the funding mismatch and the efficiency of capital management and implement differential risk supervision and prevention mechanisms for banks with different ownership, which is conducive to the reduction of bank systematic risk.

Evaluation of Investment Value of Commercial Banks: Taking ICBC as an Example

The banking industry is the most important component of the national economy, and people's daily deposit and loan business is closely related to banks. In recent years, the development speed of China's banking industry has been extremely fast, and many commercial banks have successfully gone public, achieving a rapid doubling of their asset size. Therefore, many investors are turning their attention to the banking industry. However, as a special enterprise with high debt characteristics, banks have differences in their investment analysis compared to other enterprises. Therefore, many scholars have also conducted research on this issue. Previous research has focused more on analyzing whether various estimation methods are suitable for investment analysis of commercial banks and providing relevant investment recommendations by comparing the estimated commercial bank value with the benchmark date value. This article takes ICBC as an example to estimate the intrinsic value of its stocks using the DDM model, compares the intrinsic value of the stocks with market prices, studies whether there are differences, analyzes the potential reasons for the differences and provides relevant investment suggestions.

WACC Analysis of Banks: Take JPMorgan Chase and Industrial and Commercial Bank of China as Examples

The world’s overall economic level has improved, and the financial system has also been continuously improved. Among them, international banks have long become the backbone of the financial system. At the same time, various financial instruments such as WACC (Weight Average Cost of Capital) are constantly being applied to the management and investment direction of international banks. In the process of applying the WACC decision-making model to some international banks, some problems were encountered and solutions were proposed for reference. This also provided a reference for the further improvement of the financial system and the progress and development of the financial market. This article discusses the possible significant differences in the WACC capital structure decision-making model used by JPMorgan Chase and the Industrial and Commercial Bank of China and discusses the reasons for this difference. The use of the WACC capital structure decision-making model can enrich the application background to a certain extent and better guide investment.

Emotional assertiveness, assertive communication and assertive training enhancing the employees’ performances: A China banking perspective

The study acknowledges empirical, conceptual, and policy-driven papers that address emotional assertiveness, assertive communication, and assertive training as means of improving employee performance in Chinese banking, which is a significant contributor to the Chinese economy. Most banking enterprises have suffered from poor performance and a lack of aggressiveness in operation. It can be used by both managers and employees to create a good interaction process and a favorable work environment, which can help elevate performances. The research employs a quantitative approach, utilizing a questionnaire survey and simple random sampling. The sample comprises 381 employees from the Chinese banking industry, with a response rate above 70%. The regression analysis confirms that emotional assertiveness, assertive training, and assertive communication significantly impact employee performance. In conclusion, this study contributes to academia and industries by addressing the importance of assertiveness in improving performance. The policy-driven evidence on the conceptual framework of HR literacy in emotional, training, communication, and job performance should be adopted and reviewed in the country’s existing management by objective policy and legal framework in resolving employee job performance and training that are still underutilized and have a great deal of potential to satisfy the employees and management needs by establishing and emerging nations.

A Study of the Impact of ESG Investments on the Liquidity Risk of Commercial Banks

ESG investment promotes the high-quality development of China's economy, and at the same time brings risks and challenges to the market. there is a certain contradiction between the long-cycle nature of ESG investment and the liquidity of commercial banks. In this context, how to stimulate commercial banks to take the initiative to improve ESG investment, and how ESG investment will have an impact on the liquidity risk of commercial banks has become an urgent issue to be considered. This paper selects the annual panel data of 37 commercial banks in China from 2009 to 2022, empirically tests the theoretical research hypotheses, and empirically investigates the impact of ESG investment on the liquidity risk of commercial banks by using the dynamic panel system generalised moment estimation (GMM), finally, after the above theoretical analyses and empirical studies, this paper draws the following conclusions: from the medium and long term perspective , ESG investment reduces the liquidity risk of commercial banks. Based on this, it is recommended to improve the information disclosure system and rating system of ESG investment, to promote the benign development of ESG investment in the banking industry, and to facilitate the realisation of China's "dual-carbon" goal.

Pinellia discolor: a new cryptic species distinguished from P. cordata in mainland China

Pinellia cordata (Araceae) is a perennial herb species distributed in China and Japan. Several studies have shown that there are two types of this species, and chromosome counts have shown irregular variation among populations. In this study, we investigated the morphological characteristics, established the chromosome number in root tips, reconstructed phylogenetic relationship based on whole chloroplast genomes, and elucidated biogeographic patterns based on data collected from the Chinese Virtual Herbarium (CVH) and the Plant Photo Bank of China (PPBC) for the two types of P. cordata, including type I (greenish leaf blade) and type II (colored leaf blade). We found stable significant differences in morphometric characteristics (color of the leaf blade abaxially, petiole, spathe and appendix) and the number of chromosomes. The results of the phylogenetic analysis showed that types I and II were located to different places in the evolutionary tree compared to the group. The distribution regions of these types of P. cordata were also slightly different in mainland China. These findings suggested that P. cordata should be divided into P. cordata (type I) and Pinellia discolor (type II, a cryptic species) and the latter is here described as a new species.

Taking P2P Online Lending as An Example

This paper is based on the critical reflection of P2P online lending, with the supervision mechanism as the main analysis Angle, credit assessment and risk prevention and control as the auxiliary to carry out the discussion of P2P online lending, hoping to provide more thinking for the future development of China's Internet + finance. The main research method adopted in this paper is case study, mainly based on typical cases at home and abroad to carry out analysis. After case analysis, the conclusions are as follows: 1. In terms of supervision mechanism: (1) Let the platform and the bank reach a commercial cooperation relationship. (2) When the debt relationship is formed, it is suggested to sign smart contracts. (3) When the debtor registers as a user on the platform, it can use the bank to evaluate the assets and liabilities. (4) The platform can also learn from the Dutch supervision mechanism for creditors on the Internet platform. 2. In terms of credit evaluation, China can build a credit evaluation system belonging to Internet finance in the credit investigation system of the People's Bank of China. 3. In terms of risk prevention and control, default records should be synchronized with banks and default costs should be raised.

Analysis of the impact of the COVID-19 lockdown on financial technology (FinTech), interest rate liberalization (IRL) and commercial banks’ risk-taking: Chinese empirical evidence

ABSTRACT Financial Technology (FinTech), which drove changes in the financial business landscape during COVID-19 May 2001also contribute to Interest Rate Liberalization ( IRL ) and increase risk-taking by commercial banks. Therefore, it is important to analyse the impact of FinTech and IRL on risk-taking behaviour, and to examine whether the development of FinTech will hinder IRL. To analyse the complex relationship between FinTech and commercial banks under the COVID-19 lockdown, reduce the possibility of systemic risk outbreak in the banking industry, based on the data of 34 commercial banks in China from 2008 to 2022, this paper empirically tests the impact of FinTech and IRL on risk-taking of commercial bank under the COVID-19 lockdown. Under the impact of the COVID-19, IRL has pushed up the risk of commercial banks, which is not conducive to the stability of the asset-liability structure of commercial banks. Second, there is a U -shaped relationship between FinTech and risk-taking, that is, the risk-taking level is reduced at the beginning of the development of FinTech, and then increased. Third, under the impact of COVID-19, the development of FinTech has accelerated the process of IRL , intensified the price competition of commercial banks, and further pushed up the risk-taking levels.