Research On The Impact Of Prudential Supervision On The Operational Efficiency Of Commercial Banks

The improvement of commercial banks' operational efficiency is the internal driving force to promote the sustainable development of the banking industry,and is also the key to optimize the allocation of financial resources and promote financial services to the real economy.With China's economy entering the new normal,further deepening the financial supply-side structural reform and enhancing commercial banks' ability to serve the real economy,the importance of commercial banks' operational efficiency becomes increasingly prominent.Therefore,how to further improve the operational efficiency of commercial banks in the future is one of the issues of academic concern.It is worth noting that after the outbreak of the global financial crisis in 2008,China's financial regulatory authorities have fully realized the importance of preventing the systemic risks of commercial banks and strengthening the prudential supervision of commercial banks.The report of the 19 th National Congress of the Communist Party of China stressed: " we will improve the financial regulatory system to forestall systemic financial risks." For a long time,China's financial regulatory authorities have implemented relatively strict prudential supervision requirements on commercial banks.Prudential supervision is a necessary condition for the steady development of commercial banks and the core supervision standard of commercial banks to carry out business activities.The implement of prudential supervision can effectively identify and contain the risks of commercial banks,and ensure that commercial banks can carry out various business activities in a stable system.In addition,the goal of commercial bank supervision is not only to prevent financial crisis,but also to promote the effective allocation of financial resources,that is,to pay attention to the efficiency and development of banks.Good prudential supervision policies can promote the effective operation of the banking system and thus improve operational efficiency of banks.In view of this,under the background of preventing systemic financial risks,enhancing financial services to the real economy and promoting high-quality economic development,it is particularly important whether the current prudential supervision can improve the operational efficiency of commercial banks.Then,under the background of prudential supervision,what is the change trend of operational efficiency of different types of commercial banks? Whether the corresponding prudential supervision instruments can promote or inhibit the operational efficiency of commercial banks,and whether the micro effects of prudential supervision tools are consistent?These are the main issues discussed in this paper.Based on the research results of many scholars,this paper forms a theoretical framework to study the impact of prudential supervision on the operational efficiency of commercial banks in China,and uses the panel data of 29 A-share listed commercial banks from 2011 to 2018,from static and dynamic perspectives using the three-stage DEA model and the three-stage DEA-Malmquist model to measure the operational efficiency of commercial banks under prudential supervision.This paper also uses system GMM and panel threshold model to empirically examine the impact of the main prudential supervision instruments on the operational efficiency of commercial banks in China.The following conclusions are drawn:(1)The prudential supervision policy is gradually improved,and the corresponding supervision indicators of commercial banks are higher than the minimum standards.With the gradual development of prudential supervision policies,a relatively perfect macro prudential evaluation system has been formed,further strengthening the coordination of financial supervision and maintaining financial stability.At present,the corresponding indicators in the supervision of the capital,leverage ratio,liquidity and loan loss preparation of commercial banks have reached the standard,which plays a positive role in maintaining the stable operation of commercial banks.However,it is still necessary to continues to compliance prudential supervision requirements according to the innovative behavior and potential risks of commercial banks.(2)Since the implementation of prudential supervision from the perspective of finance,the operational efficiency of commercial banks has shown a downward trend.Based on the financial index method,this paper finds that since the implementation of prudential supervision,some financial indicators of commercial banks in terms of income and cost,liquidity,asset quality and safety,and development ability show a downward trend,in particular,income and development ability indicators show a significant downward trend,and there are significant differences in the single financial indicators of different types of commercial banks.From the aspects of income and cost,liquidity,asset quality and safety,and development ability,based on the improves entropy method evaluation model,it is found that the operational efficiency of different types of commercial banks has declined after the implementation of prudential supervision,and then the operational efficiency of large and urban commercial banks has improved.Through the improved entropy method evaluation model,it is found that the operational efficiency of large,urban and rural commercial banks is no significant difference in 2018.From the perspective of economy(finance),the operational efficiency of joint-stock commercial banks among different types of commercial banks is relatively low in 2018.(3)Under the condition of prudential supervision,the operational efficiency of different types of commercial banks is significantly different.The regression results of the second-stage SFA model show that it is necessary to adjust the environmental variables and random variables.The efficiency values of the adjusted three-stage DEA model and the three-stage DEA-Malmquist model have some changes.The static results show that the change of scale efficiency is the main factor affecting the operational efficiency of commercial banks.Based on the three-stage DEA model,there are significant differences in the operational efficiency of different types of commercial banks.The comprehensive technical efficiency ranking is: large commercial banks>joint-stock commercial banks>urban commercial banks>rural commercial banks.The dynamic results of the operational efficiency of commercial banks show that from the cross-section analysis,the total factor productivity of most commercial banks is greater than 1,and the technical efficiency basically does not deviate from the production frontier.It can be seen that the change of total factor productivity of commercial banks is mainly caused by the changes of technical progress index.In addition,there is no significant difference between the technical efficiency index and the technical progress index of large and joint-stock commercial banks,while the technical efficiency index of urban and rural commercial banks is significantly higher than that of technical progress index,and only the technical progress index of joint-stock commercial banks is greater than 1.From the perspective of time series analysis,there are some differences in the changes of total factor productivity of different types of commercial banks from 2012 to2018.The total factor productivity of joint-stock and urban commercial banks fluctuates more frequently,and the total factor productivity of other types of commercial banks has experienced a process of up-down-up.Further research on the evolution of commercial banks' operational efficiency.According to the variation of coefficient of variation,we can not judge whether it is ?convergence or not.However,according to the absolute ? convergence and the conditional ? convergence test,it is found that there are the absolute ? convergence and the conditional ? convergence.(4)Prudential supervision has a certain impact on the operational efficiency of commercial banks,and there are many mechanisms.As for the overall regression result,the capital adequacy ratio,liquidity ratio and loan provision ratio in the prudential supervision instruments have a significant promoting effect on the improvement of the operational efficiency of commercial banks,while the leverage ratio has a significant negative correlation with operational efficiency.On the whole,the influence of prudential supervision instruments on the operational efficiency of commercial banks is not consistent,but most of them can promote the operational efficiency.For the results of heterogeneous regression,the sample commercial banks are divided into large and medium-sized commercial banks and small commercial banks for empirical test.It is found that the capital adequacy ratio,liquidity ratio play a significant role in promoting the operational efficiency of large and medium-sized commercial banks.For small commercial banks,the capital adequacy ratio has a positive effect on their operational efficiency,while the leverage ratio,loan provision ratio have a negative effect on the operational efficiency of small commercial banks.Further research through the panel threshold test shows that,there is a single threshold in the impact of the leverage ratio,liquidity ratio and loan provision ratio in prudential supervision instruments on the operational efficiency of commercial banks,namely,there is a nonlinear relationship between these prudential supervision instruments and operational efficiency.Besides,the test between the capital adequacy ratio and operational efficiency has not passed the threshold test,indicating that there does not exist nonlinear relationship.In addition,prudential supervision has a variety of impact mechanisms on the operational efficiency of commercial banks.Stability mechanism is an important mechanism for prudential supervision to promote the operational efficiency of commercial banks.The capital adequacy ratio,liquidity ratio and loan provision ratio can affect the operational efficiency of commercial banks through stability.From the perspective of business structure,the leverage ratio regulation has a constraint effect on the business structure of commercial banks.When the optimization degree of business structure is reduced,the negative impact of the leverage ratio on the operational efficiency of commercial banks is more significant.Besides,the capital adequacy ratio and leverage ratio lead to the change of commercial banks' operational efficiency through the change of profitability.That is to say,with the decline of profitability,the positive effect of the capital adequacy ratio on the operational efficiency of commercial banks is weakened to a certain extent,and the inhibitory effect of the leverage ratio on the operational efficiency of commercial banks is significantly enhanced.Finally,in order to further improve the operational efficiency of commercial banks,from the perspective of commercial banks,this paper puts forward corresponding countermeasures and suggestions according to the above qualitative and quantitative analysis results.Commercial banks should establish the concept of prudent operation and management and carry out all business in compliance,define their own strategic positioning and give full play to comparative advantages,scientifically regulate and control the prudential supervision indicators and proactively comply with regulatory requirements,attach importance to the development of fintech and improve the competitiveness of commercial banks,focus on asset quality and capital supplement and enhance the operational stability of commercial banks,promote business transformation and improve innovation capacity,enhance the information disclosure and attach importance to the quality of information disclosure,grasp the opportunities of financial opening and enhance the awareness of fair competition,strengthen the construction of talent team and reduce brain drain.