The Research On The Procyclicality Of The Banking System In China

Financial system is inherently pro-cyclical characteristics. As China's banking market is speeding up the process, commercial banks'pro-cyclicality will gradually come out. Further more until the end of 2010 it will be the full implementation of a higher sensitivity to risk a new Capital Accord, pro-cyclical effects will be strengthened. How the commercial banks form the inherent pro-cyclicality? If China's banking industry exists the pro-cyclical effect, if it exists, whether the effect is to promote and enlarge the macro-economic fluctuations, and influce the monetary policy? On these issues for discussion and analysis has an important practical significance for that China's banking market maintain sustained and healthy development.This paper first introduced a micro-banking model, describes the behavior of bank credit reacting to external macroeconomic shocks. On this basis, the article on China's Bank of the existence of pro-cyclical nature of its impact on macroeconomic fluctuations and the impact of monetary policy into the empirical analysis. Empirical design in the first peak - valley - a detailed analysis of peak method in 1998 China's growth rate since the credit cycle characteristics, there are two ten-year cycles and six short-period fluctuations. Then found that fluctuations in economic growth rate of loan growth Granger causes volatility in the loan,it proves that the external economic impact of the lagged positive feedback, that is, the existence of commercial banks of China's pro-cyclical effect. However, except in January 1998 to October 2000 the credit crunch has deepened the economic recession, in October 2000, the banking sector dose not Granger causes pro-cyclical fluctuations of China's economic growth. Credit performance is neutral; the banks'pro-cyclicality didn't enlarge economic fluctuations. Further analysis showed that the cis-cycle performance of monetary policy was weaken and worked under the effect of the non-symmetry obviously.Finally, on how to slow down China's commercial banks'pro-cyclical features ,we put forward specific measures in the eyes of the the external supervision from the bank and the intrinsic banking with motivation ,such as giving well equipments for the BaselⅡ, focusing on the procyclicality of the new Capital Accord,strengthening the communication between the regulatory authorities and the Central Bank,developing other Transmission channels except the credit transmission channel and enhance the capacity of bankers the reverse thought, to take the initiative to face the cycle and so on, aiming at promoting China's banking market process and effective to overcome and prevent pro-cyclical fluctuations in the economic cycle acts on the negative impact.