Correlative Research Of Subordinate Debts And Capital Structures Of Commercial Banks In China

In recent years, Chinese banking industry exist the phenomenon of inadequate capital and narrow financing channels in varying degrees.China promulgated the "Commercial bank's capital adequacy ratio management approach" in December 2003,which allowed commercial banks to issue subordinated debt to replenish the capital adequacy ratio, subordinated debt began to pull the prelude of development in Chinese capital markets. Many commercial banks enter the expansion phase and the preparation period of listing, the demand for capital is particularly urgent. Subordinated debts of commercial banks, as a new means of financing, are becoming popular increasingly. Not only because of its rapid financing convenient, but also its features attached to subordinated debts, which can supervise the commercial banks.In this paper, the first chapter expounds the background and the significance of this article. In the background of implement the Basel Capital Accord, how to meet the three pillars of Basel Capital Accord becomes the primary concern. To some extent, the banking sector is an industry by absorbing the debt, to seek the new ways adding capital becomes a priority. Subordinated debt's long-term, permanence and other features, make it become the important means of financing. Subordinated debt can add capital and improve capital adequacy ratio, it can improve their own internal mechanism and enhance the competitiveness of the banks and the anti-risk abilities. The correlative analysis of the subordinated debt and the bank capital makes the dynamic continuous adjustment of capital structure and the bank's capital structure of the stability in the course of operation. In the second chapter of this paper, it expounds MM theorem, the modified MM theorem, balance theory, theory of banking business as well as other capital structure theories. As the same time, it describes the subordinated debt from the concept and function. "Basel Capital Accord" provides that:capital adequacy ratio shall not be less than 8%, core capital adequacy ratio not less than 4%, supplementary capital not exceed 100% of core capital. Laws and regulations on the Subordinated debt in China are still in replenishing. The biggest difference is the order to repay between subordinated debt and other financial bonds.ChapterⅢis divided into two parts. Firstly we analyze the state of development subordinated debts of foreign commercial banks from the issue scale, currency distribution, distribution methods, distribution rates and distribution object. Secondly, we analyze the development of domestic commercial banks in subordinated debt status quo. Basing on Chinese subordinated debts of the development, we can divide it into three stages. Interest rates and duration of the release of subordinated debt should refer to capital structure. Excessive cross-subordinated debt is apt to cause systemic risk, moral hazard, risk of weakening oversight. The actions of the subordinated debt are not only the supplement but also the continuous dynamic channels of the financing.ChapterⅣanalyzes the subordinated debt associated with the capital structure, subordinated debts spread in bond yields over the same period and issue scale as logarithms, select the size of banks, the total return on assets, loan-to-deposit ratio, debt to equity ratio, liquidity ratio, non-performing loan ratio as the independent variables. We also make T test, DW test and F test to results of the regression. We select a case about China Construction Bank, and analyze the CCB capital structure with the subordinated debt, which can give commercial banks power of continuing to improve their profitability and improving the managements.Based on the fourth chapter, it will analyze the issues of the development process with subordinated debt. In China, many urban banks and joint-stock banks have accelerated the restructuring of capital and the pace of expansion in order to listing. State-owned commercial banks are also increasing the improvement of corporate governance mechanisms and continually conducting the joint-stock transformation. All of commercial banks face the problem of insufficient capital in the course of reform. Relying on government funding is not feasible. It will make banks to bear on the Government of colors. Introduce other strategic investors and uses actively of capital markets are important. Subordinated debt as an emerging financial instrument has many advantages. In recent years, China's commercial banks have liquidity problem and idle funds, subordinated debt can be used as investment in financial instruments and improve the capital structure of commercial banks. Subordinated debt in the supplementary capital, it is also has the role of market discipline, which requires commercial banks to disclose the information and continuously enhance profitability, it also can enable the capital structure stability, predictability and operational. It should be noted the amortization of subordinated debt, it will loss the treat of capital in the last year, but commercial banks have to continue to pay interest in accordance with the interest rate issue. Therefore, commercial banks should solve their cash flow problems so as to meet the subordinated debt interest costs.