Bank Systemic Risk Provision

The process of financial crises shows that the credit behavior of commercial bank and the provision for loan losses has a significant pro-cyclical features.The other types of assets of commercial banks also face the risk of such a submissive economic cycle, its provision for accrual is a passive adaptation to the economic cycle in a large extent, rather than take the initiative against the cyclical nature of systemic risk management. This has made commercial banks reduce the risk of the accrual provision due to the good asset quality during the economic boom, in the depression period, It has greatly increased its level of risk in the economic recession. The existing provision of the bank system is also pro-cyclical and can not avoid the risk of the cyclical effect. The Basel Accord risk management mechanism is only a micro-risk management mechanism, to reduce the systemic risks, banks should establish a mechanism that counter-cyclical macro-economic and focusing on avoiding the cyclical and systemic risk. Establishing a systemic risk provision funds, so that the increase of provision in the economic boom act as a provision for the role of reservoirs, we can phase in the economic downturn or a sudden withdrawal of systemic banking crisis during the use, to prevent cyclical, systemic risk.