The Research On The Impact Of Business Structural Differences To Banking Capital Regulation

Capital regulation is the core content and the foundation of banking regulation. Regulatory authority can bind the operation behavior of banks and maximize capital’s function for risk coverage and absorption losses from an external perspective by setting the minimum capital adequacy ratio. The significant externalities and potential risk banks determine a fact that they must carry out their business under the strict and scientific external supervisions, the adjustments of capital regulatory policies will have a significant impact on banks. Thus, commercial banks need to calculate their actual capital adequacy ratio according their total risk-weighted assets and timely adjust business structure or risk-taking behaviors to reduce their total risk-weighted assets, making best efforts to meet regulatory requirements, precaution and resolve operation risks.On one hand, with the international and domestic capital regulatory policy tightening, as well as China’s banking industry has been entering a new development stage, non-credit business has gradually come into focus and become the future direction. Besides, it is viewed as an effective mean for increasing actual capital adequacy ratio which can help save the core capital for bank. This article doubts about this view and make some deep studies about the real relationship between the bank’s non-credit business scale and its Tier-1 capital ratio, our findings are different from the traditional views about their relationship and reveal some complex correlations between the two: non-credit business cannot help bank save Tier-1 capital, there are many the micro factors will codetermine a bank’s Tier-1 capital ratio. Behaviors such as underestimating the risk of non-credit business, blind pursuit of business structure innovation, over development in intermediary business will bring negative impacts on bank’s Tier-1 capital holdings, which has sounded the alarm for China’s current accelerating banking reform.On the other hand, we also noticed another problem on the basis of the above research, which is so important that we cannot ignore. Commercial banks have their own characteristics because of their historical position, business region, core competency and so on, those factors may lead to a fact that the same capital regulation policy has the obvious heterogeneous effects on different banks. With the help of math model deducing, this article proves that capital regulation will make banks adjust their loan scale and bring the credit fluctuations. Then we take 123 banks in China as research sample and use the vast financial data of them to get a conclusion that the different business structures of banks will lead the different regulation effects especially on the credit fluctuation effect. Only face squarely this kind of heterogeneous capital regulation effects brought about by banks’ business structure, can we properly evaluating the implement of regulatory policy and provide a valuable reference for scientific policy-making in future, by which the banking regulator can formulate scientific regulatory policies and improve their work capacity. Moreover, our conclusions also give some meaningful suggestions about how to conduct the banking capital regulation under the condition of China’s on-going banking structure transformation, as well as how to make regulatory policy to help reduce the pro-cyclicality of bank’s credit.