An Analysis Of Banks' Risk-taking Behavior Under The Capital Regulation Standards

The appearance of the New Basel Accord is a landmark of international banking industry entering the total-risk management epoch. Capital regulation standards and banking risk management have been two main concerning of finance research for many years. Then how the capital standard affect banks' risk-taking behavior should be of more theoretical and practical significance. In this paper, option-pricing method is applied and then after a differential equation is gotten, we can analyze the asset risk state of a simple-organized bank. Different behaviors of commercial bank under different capital regulation standards is compared in this paper, and then some conclusions from the model analyzing is related to the reality in China and we give some advices.The whole paper is made up of four chapters. In chapter one, there is a brief historical retrospect to banking capital regulation theory, especially those recent researches is introduced. The basic model for this paper is erected in chapter two. The model illustrates banks' basic characters by several parameters and set up the differential equation of bank asset and etc. Then those boundary conditions for equation are considered. Chapter three is the core of this paper. There we study how several parameters, such as asset risk value, the frequency of regulation audit and so on, have their influence on banks' risk-taking behavior while some constraints are given. Chapter four is about conclusions, where the main ideas of this paper are listed. Then these conclusions are applied to analyzing several questions existing in China. In the end, there are some considerations about some deficiencies of this paper and future possible researches.