Capital Provision Of The Commercial Bank On Preventing Systemic Risk

The global financial crisis erupted in the United States was quickly spread to the world, the substantial harm of which was a wake-up call for regulators of different countries. After the crisis, strengthening macro-prudential regulation and preventing banking systemic risk have become the focus of the regulatory authorities, financial institutions, even the public. Basel Ⅲ puts forward various macro-prudential capital tools to cope with the systemic risk in the banking insustry, including respectively adopt counter-cyclical capital and systemically important bank additional capital, aiming for the time and spatial characteristics of systemic risk. After taking into full account both Basel Ⅱ and Basel Ⅲ, China Banking Regulatory Commission has issued the “commercial bank capital management approach(trial)”in 2013. But for now there is still no complete systemic risk capital regulatory framework. In this context, this paper analyze the systemic risk and the mechanism of macro-prudential capital tools in Basel Ⅲ, And then analyze the deficiencies of systemic risk additional capital regulatory framework in Basel Ⅲ. On the basis of the analysis, the corresponding solution and the implementation method are put forword, and finally formed a set of relatively complete systemic risk additional capital regulatory framework.As the foundation of systemic risk regulatory capital provision, the formation mechanism of systemic risk is analyzed. The Basel Ⅲ as benchmark of banking regulation, the design concept of its regulatiory mechanism can bring us some illumination. By the analysis of regulatory reform of systemic risk prevention in Basel Ⅲ, and then analyzes the mechanism of the macro-prudential capital regulatory tools based on the perspective of commercial banks implement IRB method.Basel Ⅲ requires strengthening macro-prudential regulation, meanwhile continues a delicacy economic capital management framework in Basel Ⅱ. And the Basel Ⅲ as a global regulatory framework, the applicability of its systemic risk additional capital framework in China is worth thinking about. By the analysis of the coordination problems among counter cyclical capital, systemically important banks additional capital and economic capital management, and the deficiencies which exist in counter cyclical capital and systemically important banks additional capital provision framework in Basel Ⅲ. Furthermore, a differentiated systemic risk regulatory capital framework and implementation are put forward.Systemic risk spillover is the precondition of systemically important banks additional capital provision. Co Va R method can be used to consider the risk level of the entire banking system when banks are in extreme situation, which is consistent with the concept of spatial systemic risk. By using the stock yield data of listed banks and copula functions to fit the relationship betweeen the single bank and the bank system, and then, calculate the systemic risk spillover of the single bank. There are major differences in the results of risk spilllover effect of banks. According to the additional capital’s absorption of risk spillover, the commercial banks capital levels are important reasons which lead to different results in measuring systemic risk spillover effect.Provision of systemically important banks additional capital is in response to the commercial bank’s contribution to the potental risk of the banking system, at the same time, the provision level of systemically important banks additional capital is the additional requirement proposed by regulatory authorities under the perspective of macro-prudential. This means that provision of systemically important banks additional capital is closely related to the tolerance of regulatory authorities. By making reasonable assumptions on regulatory tolerance, the evaluation of commercial banks’ systemic importance and the provision of systemically important banks additional capital are investigated. The result shows that the commercial banks’ capital adequacy has a big impact on risk spillover, through holding the risk spillover constant,evaluating banks’ capital adequacy, and then getting the systemic important of commercial banks. The five big state-owned banks have a bigger spillover effect compared with joint-equity commercial banks. The change of regulatory tolerance has little effect on state-owned banks,but has a relatively larger effect on joint-equity banks.The provision method of counter cyclical capital is an important content of differentiated systemic risk additional capital framework. Considering the applicability of counter cyclical capital provision of Basel Ⅲ, and the high correlation between credit pro-cyclicality and risk pro-cyclicality, the provision of counter cyclical capital is designed under the perspective of commercial banks’ risk. Using top-down economic capital measurement method to get banks’ risk and then review cyclical variations of banks’ risk. The empirical analysis shows that the commercial banks’ risk is significantly affected by the fluctuation of the credit assets, and small fluctuation of credit assets will cause huge risk in banks. According to the relationship between economic capital and credit assets fluctuation, a counter cyclical capital provision mechanism is established.The commercial bank needs to reach the capital requirements calculated by the systemic risk additional capital regulation framework in the future. So the systemic risk additional capital regulatory framework must have the corresponding feedback mechanism, in order to supervise the commercial banks whether can meet the capital requirement. Improving the KMV model with the core tier one capital adequacy ratio requirement, the improved model can be used in feedback of capital provision. With the improved KMV model to estimate default rate of the commercial bank, and then obtain the capital regulatory compliance rate. Market data and the assets and liabilities data of commercial bank used in the model,not only can reflect the fluctuations in the value of assets,but also can reflect the risk of asset..In view of the current situation of banking industry and the superiority of differentiated systemic risk additional capital provision framework, proposing several relevant suggestions on the implementation of systemic risk additional capital provision framework, including optimizing the internal and external environment of banking risk, soliding micro data base, broadening the channels for capital replenishment, establishing a fair and transparent market environment.