The Relationship Between Capital Adequacy Ratio Of Commercial Banks And Bank Efficiency In China

The whole world financial crisis caused by the sub-loan crisis in 2008 fully exposed the operating risks of the financial institutions with excessive leverage. The financial institutions which were lack of capital adequacy ratio were often the first batch of closing. After the sub-loan crisis, the capital adequacy ratio as the key factor of the Barthel agreement is being accepted by many developed market economies, including the Europe, the US and so on. Concerning China, which is gradually integrating to the global economic and becoming the significant force of global economic; to normalize and institute the capital sufficient supervision is a correct choice.From the development process of banking supervision, each country's banking supervision is actually in a "strict supervision - deregulation - strengthening supervision - further deregulation," form. Despite the bank's capital adequacy ratio in different stages is usually restricted by many factors, it should be noted that each country's implemented strengthening banking supervision was often at the expense of bank efficiency. At the same time, each country implemented deregulation measures would increase the risk of banking operations, which led to the banking crisis, and even led to a financial crisis.In a sense, management of bank capital adequacy ratio is actually a history of a game between the bank stability and the bank efficiency. In the past, the bank capital sufficient supervision paid insufficient attention to the coordination between the bank stability and the bank efficiency, and usually separated the two to be considered. But today, the capital sufficient supervision carried by supervision organization can not only help the Commercial banks to reduce the operation risk and the risk motive in order to guarantees the bank stability, but may also help the Commercial banks to improve the management and operation performance and then to prompt the operation efficiency. So, the stability and efficiency may not substituted by each other, and the capital sufficient supervision may to some extent integrate the banking stability and efficiency naturally. How to implement effective capital adequacy supervision to improve the coordination between commercial bank capital adequacy ratio and bank efficiency, now appears more realistic.Therefore, this thesis will be based on the current situation and emerging issues of capital adequacy ratio of commercial banks in China, and analyze the relationship between commercial bank's capital adequacy ratio and the efficiency. Compared with the similar research, the innovation of this thesis is emphasized on the coordination between the bank stability and the bank efficiency. Basing on the empirical research of 13 Commercial banks date from 2005 to 2009, we find that the coordination between the commercial bank's capital adequacy ratio and the efficiency is not satisfying. And finally, bring forward strategies and recommendations on how to determine the capital adequacy ratio of commercial banks reasonably, and how to strengthen the capital adequacy ratio of commercial bank management.