Bank Refinancing And Bank Capital Optimization

The year 2009 was not ordinary for China banking. Banks in China played the vital role in offering loans within economic sector with the outbreak of financial crisis in 2008. According to People's Bank of China, the newly adding loans in 2009 are 9600 billion Yuan, which have been doubled since 2008. Such an enormous amount of credit is unprecedented in the sector's history and provides sufficient liquidity for our economy. Thus, our steady economic operation could be secured under the financial turmoil. Excessive credit expansion, however, poses a great challenge to our property quality of our banking.In 2009, the CBRC promulgated the "Regulations on commercial bank capital supplement mechanism," which subordinated the traditional way of additional capital is becoming the past, more and more banks choose to add additional capital through their investment.This year our commercial banks firstly run under New Basel Capital Accord. In addition, this accord is carried out after the financial crisis and at the beginning of economic recovery. These special circumstances bring greater challenges to our commercial banks and, more importantly, our economy.Refinancing is no doubt the shortcut for solving the deficiency in bank capital. Through refinancing in the primary market and secondary market, banks can acquire capital immediately to solve the deficiency problem and attain the goal set by management level. But this solution is not the permanent plan for our banks. On the other hand, high finance of banks put great pressure on the capital market in the short term.Based on New Basel Capital Accord, this paper, starting from the refinancing state of our commercial banks in 2010, analyzed our banks'capital structure and its trend of recent years to discuss the major causes of changes in structure and amount of our commercial banks'capital. Several aspects influenced by these changes are also the theme in this paper, including refinancing ways, channels, scale, shareholder and secondary market. Finally, how to optimize the banks' capital are concluded in the end of this paper.In Chapterâ… , the author summarized the paper's context, significance and overall structure. After financial crisis, credit expansion in banks brought about relative insufficiency in capital of our banking. This Chapter stated how banks influence themselves and secondary markets by refinancing and how banking supplies the capital over the long haul.Chapterâ…¡:The General Theories on Refinancing and Banks' Capital Optimization. The author briefly explained the capital structure theory, financial regulation theory and two strategies about capital optimization under New Basel Accord.Chapterâ…¢:Reasons and Impacts of Refinancing in Our Banking. The author found out by diagram and data the current state of China banking's capital structure and the developing trend of capital adequacy ratio in recent five years. In this trend, banks face refinancing pressure, and thus major banks in China put forward their plans. This part of the paper researched how refinancing affects several aspects including shareholder, capital market and banks.In Chapterâ…£, the author firstly make use of data and diagram to conduct positive analysis for capital structure in China, focusing on the impacts on our capital adequacy ratio by ratio of core capital and affiliated capital, undistributed profit and convertible bonds. Then, calculating model is used to establish regression model. Capital adequacy ratio serves as the explained variable while the overall asset, deposit taking, ROE and ownership structure serve as the explanatory variable. The research goal is to discuss the relation between these factors and capital adequacy ratio, and analyze every factor in numerator/denominator by the capital adequacy ratio formula.Above all, the author gave some advice to our banks' capital optimization in the last Chapter.To sum up, this paper researched the capital structure and its amount in our banking in the context of our banking's refinancing in 2010. Coupled with capital structure and capital adequacy ratio descried in New Basel Accord, and their influence on our banking, this paper analyzed the current state and developing trend of our state-run commercial banks. The author also found out the reasons by positive analysis, and put forward some advice in hopes of providing several helpful lessons for establishing the sound mechanism of dynamic capital supply and optimization.