Theoretical And Empirical Analysis Of Macroprudential Supervision

Macroprudential supervision supplies a new direction to the financial regulator for thefinancial risk management, turning the regulatory perspective from the micro-prudential tomacroprudential. It can supplement the supervision blank which has exposed in the financial crisis.With the deepening and development of financial markets, the correlation between the financialinstitutions and financial markets, financial institutions and financial institutions are constantlyreinforcing. The dispersion and accumulation of financial risks in the financial network has becomemore and more complex, the traditional supervisions which for the stable operation of individualfinancial institutions are not able to protect the financial system as a whole is in a stable state. Afterthe discussion of the financial regulator, macroprudential supervision is given to keep watch thesystemic risk, maintain the stability of the financial system, ensure that the financial marketsprovide normal services to the macroeconomic development as well as the responsibility, itbecomes the core content of the financial regulatory reform.Although the macroprudential is not a new concept, but as a newly introduced financialregulatory policy, there are many problems that need to be further explored and discuss both at thetheoretical level and a practical level about macroprudential supervision, including the regulatoryobjectives, tools, effectiveness, mechanism of action and policy coordination aspects. Based on thelogical context, we start from the establishment of the proposed concept of macroprudentialsupervision and regulatory framework, to explore the measure of systemic risk in the financialmarkets, especially the role of financial institutions to market risk contribution, given the systemicrisk of preliminary judgment. Subsequent departure from the cross-sectional dimensions and thetime dimension, tracking and evaluation of systemically important financial institutions,counter-cyclical macroprudential regulatory tools advantages, disadvantages and practical, thecoordination about macroprudential supervision and monetary policy in the implementation processof financial stability, provide a reference for dealing some of the problems encountered in theprocess China’s macroprudential regulatory framework establishing.First, we use the capital adequacy ratio, the ratio of non-performing assets, bank credit to GDPratio, stock trading to GDP ratio, spreads, depth of credit information index, credit informationsystem coverage of legal rights index of eight indicators to build Financial Regulatory Comprehensive Index to test the effectiveness of financial supervision in China, the empiricalresults show that effectiveness of financial supervision in China in recent years was increasedgradually trend, which is an affirmation of the hard work of our government and regulatoryauthorities over the years, but in the horizontal comparison with the developed countries China’sFRCI score is significantly lower, indicating that there are still large room for improvement. Failureof traditional regulatory measures in the face of this crisis, the US-led developed countries havetaken the introduction of macroprudential policies, and the implementation of the reform of theregulatory system, the introduction of macroprudential measures from the financial regulatoryComposite Index score of view effectively improve the U.S. financial regulatory objectives arebeing met and the effectiveness of regulation, as the development trend of the future internationalfinancial regulation, China is necessary to combine the objective appropriate reference and theintroduction of macroprudential supervision.Second, we make a research on systemic risk, in this article systemic risk has been defined asa certain trigger factors and lead to the spread of instability in the financial system as a whole, andit is the finally causes of the serious damage in financial markets and the real economy to theoverall risk, based on the concepts and methods of the measurement of systemic risk analysiscombing, from the perspective of financial institutions contribution to the overall risk, the use ofmarginal expected short for the systemic risk proxy variables, using the data of listed banksmeasure of systemic risk. The empirical results show that during the period January2008toDecember, China`s systemic risk is significantly higher than the usual period, just like the actualsituation of the financial crisis coincides. Ranking from the marginal expected short, the size offinancial institutions and the level of leverage was negatively correlated with the systemic riskcontribution of financial institutions, that is, the smaller banks with lower leverage ratio get ahigher contribution to the systemic risk, This is mainly due to the small and medium-sized financialinstitutions tend to be weaker than large financial institutions in risk management and the ability todeal with the risk. In addition, the macroeconomic environment is also one of the factors affectingthe systemic risk, better macroeconomic environment lead to lower financial systemic risk.Third, the article learn about the macroprudential supervision from both cross-sectionaldimensions and time dimension of macroprudential, such as identify systemically importantfinancial institutions, discuss the counter-cyclical regulatory tools and applicability. Quantitativeanalysis the systemically important institutions with systemically important index SII and collateraldamage index CDI, the results show the SII of China’s banking institutions systemically importantexplanatory power significantly weaker than the CDI, the collateral damage index more in line with actual market performance in China, financial significant positive correlation between the size ofthe institutions of systemic importance to their size, BOC, ABC, ICBC, CCB, BOCM in thefinancial system occupy a more important position in our Financial Network, their impact on thestability of the financial system was significantly higher than other small and medium-sizedcommercial banks. From the study of Counter-cyclical regulatory tools we found that there issignificant inertia of China`s capital conservation buffer strategy, return on assets does notsignificantly affect the size of the buffer capital, fluctuations in the economy and the provision ofbuffer capital has a strong positive correlation between capital adequacy ratio of the change in theeffectiveness of macroeconomic fluctuations zoom. It`s the real-time China take its counter-cyclicalregulatory with the advanced and techniques regulatory models from foreign country, but still facesmany challenges in the implementation of regulatory measures on the economy cycle stage ofjudgment, which has an important impact on the counter-cyclical regulatory tools.Finally, we discuss the coordination between the macroprudential supervision and monetarypolicy in achieving financial stability, the goal of the process of interaction were analyzed usingdynamic stochastic general equilibrium model to simulate the empirical results show that when theeconomic fluctuations caused by supply shocks, macroprudential supervision and monetary policythere is a conflict, the performance of macroprudential supervision is concerned only with thefinancial stability exacerbate macroeconomic fluctuations; when economic fluctuations caused bythe financial shocks or real estate impact of macroprudential supervision and monetary policy canbe effective coordination and macroprudential The regulatory perform better than the monetarypolicy, monetary policy due to the need to take into account the financial stability, the effect of theimplementation of its policy objectives affected the performance of larger fluctuations in theinflation rate. From the macro-economic level, the macroprudential supervision is to reduce thefinancial shocks and special impact on the overall economic impact tool, it is not as a replacementof the monetary policy, the implementation of macroprudential measures need to be very cautious,in general, period of improper use of macroprudential supervision of the economic environmentdamage is much larger than help. In addition, the article at the end of the establishment ofmacroprudential regulatory framework in line with China’s national conditions further reflection,combined with empirical conclusions and the objective of the country’s financial market designrecommendations on the improvement of existing regulatory policies and regulatory tools.