A Study Of Capital Adequacy Ratio Management Of Shareholding Commercial Bank In China

Capital adequacy ratio(CAR) indicates the requisite capital quantity possessed by the bank and the ratio of the bank capital and the weighting risk assets under the requirement of the supervisory authority, which is the important criterion of measuring the adequacy of the capital and risk-precaution of the bank. Capital is the life of the modern commercial bank and the last line of defense to keep the public belief and prevent risk. In the recent years, shareholding commercial banks become the important constitution of Chinese financial system accompanied with the fast development of the national economy. However, due to the realistic and historical localization, Chinese shareholding commercial banks lack of the hard capital restriction for many years, resulting in the low level of CAR. Along with the strengthening of domestic capital restriction and supervision, the increasingly emergence of the problems of scarcity capital in shareholding banks becomes the obstructions that restrict the operation and development of bank. This paper firstly analyzes the status quo and problems in the CAR management of shareholding commercial banks by theoretic and demonstration method, then bring forward the practical approach to enhance the CAR of our shareholding banks.The paper consists of four chapters.The first chapter expatiates on the idea of selecting topic and study background, states the challenge in capital supplement and the urgency of enhancing CAR management of Chinese shareholding commercial banks under the strengthening of capital regulation and the whole opening of domestic financial market. Relevant references of domestic and foreign scholars are reviewed.The second chapter introduces the relevant concept and theory. Firstly, this chapter analyzes the function of the bank capital, which includes absorbing loss, sustaining the belief of the market, supplying operation financing, restricting the fast scale extended and risk-beared. Then reviews the composing of bank capital according to Basel Accord, the theory of commercial bank optimal requirement quantity of capital, the defining and measuring of capital adequacy ratio according to Basel Accord. This chapter is the theory basis of the following research.The third chapter analyzes and studies the status quo and problems in the CAR management of Chinese shareholding commercial banks. This part links the research methods of theoretic and demonstration, analysis and comparison, Using a lot of diagram vividly presents the status quo of the CAR in Chinese shareholding commercial banks: being low level and reducing year by year by compare with international advanced banks and the reformed State-owned banks, And try to find out the problem and the restriction in capital replenishment of the shareholding banks. Firstly, the fast extending of bank's scale consumes a mass of capital. Secondly, lower overall profitability results in shareholding banks limited accumulating capability. Thirdly, unreasonable capital structure and ill assets also quicken the consume of the capital. Fourthly, the difficulties of capital supplement channels in shareholding banks cause the lack of external infusing function, resulting in the rise of capital cannot march up to the increase of the bank's business, restricting the development of shareholding banks. Therefore, shareholding commercial banks must bring the management of CAR to the stratagem altitude, supply the capital through many kinds of channels and methods as soon as possible in order to enhance the CAR and international competition ability.The fourth chapter presents many approaches to enhance the CAR in Chinese shareholding commercial banks in aspects of numerator strategy and denominator strategy. In the sight of numerator strategy, shareholding banks should make great efforts to enhance numerator, increase the core capital and the supplementary capital. The main methods are as follows: First, to increase overall profitability and strengthen the self accumulating capability, shareholding banks must potentate the force of innovation of banking business, develop the retail banking business and intermediate business, practice differentiation competitive strategy. Second, listed in domestic and overseas market and introducing overseas strategic investor increase core capital; issuing subordinated debt , convertible bond and hybrid capital instruments increase supplementary capital. However, besides the bank-self accumulating profit, the other methods take effort through the external, cannot settle the problem of low CAR in shareholding banks root and branch under the incomplete internal controls and management system. Shareholding banks must take denominator strategy, reduce the ratio of risk weighted assets, arrange the risk assets combination in reason, strengthen the power of deal with ill-assets, implement bank asset securitization business, enhance the risk management level in order to build the risk management system based on risk measurement and the collocation of risk capital. In a word, shareholding commercial banks select the reasonable financing approach in light of their selves condition and future development trend, build dynamic capital supplement mechanism as soon as possible, consequently, resolve the problem of capital scarcity entirely and walk into the fine development track.