The Impacts Of Capital Adequacy Regulation On Commercial Bank Capitalization And Risk-taking

Bank is the most important financial intermediaries in a country’s economy，Governments pay close attention to the supervision and management of bankingproblems to stabilize the finance system and improve the economy, and the adequacyratio supervision is the core of banking supervision. The supervision of capital adequacyratio is a measure of the capital in a commercial bank which is carried out bysupervision authorities by the strong hand, in order to urge commercial banks onholding sufficient capital and limit the risk of over-expansion behavior, so as tomaintain the stability of the financial system. Because of deficiencies in bank depositinsurance, moral hazard, information asymmetries and external effects, the capitaladequacy ratio has been introduced into banking supervision as a mean of controllingthe risk of banks, and China promulgated “Management of the capital adequacy ratiofor commercial banks”, which marks the beginning of the bank’s capital has graduallygotten strict regulatory capital adequacy ratio supervision stage. So it is necessary toanalysis the impact of capital adequacy ratio to the portfolio risk, which will help tosummarize the experience and lessons, to improve the financial supervision policy, toenhance the effective of the financial supervision and management.This dissertation analysis of the theoretical and empirical literature associated ofthe capital adequacy ratio supervision and the portfolio risk, describes the developmentprocess of capital adequacy ratio control after the Basel Accord was taken into force,describes the current situation of China’s capital adequacy ratio supervision. Then,based on the environment of banking industry in China and regulatory environment, weuse the relevant data of the banking industry in china, empirically analysis of theimpacts of capital adequacy regulation on commercial bank capitalization andrisk-taking and analyze how the commercial banks adjust their capitals and risk takingunder pressure of capital regulation before and after financial crisis. with3SLS,considering procyclicality of the regulatory capital requirement, size, rate ofreturn on capital, the capital supervision pressure, not-performing loan and so on.The results show that, after the “Management of the capital adequacy ratio forcommercial banks” was brought into effect, capital adequacy ratio has been improvedmuch. And have reached the minimum regulatory requirements. Capital adequacyregulation improve the capital obviously but has a positive and insignificant impact on the change of risk level. Negative correlation between bank size and capital movements,large-scale capital banks raise capital on capital markets much easier, but the bigger thecommercial bank assets, the easier to adjust risk. Enhance the profitability ofcommercial banks the main way to raise their capital adequacy ratio. Non-performingloans has inhibition on banks’ risk behavior. State-owned and other commercial bankshave prominence difference in asset risk adjustment. And capital adequacy ratio hasbeen to some extent, procyclical in China.Then analyze how the commercial banks adjust their capitals and risk taking underpressure of capital regulation before and after financial crisis. Find that the speed ofadjustment of the level of bank capital is twice as fast as before the crisis. Financialcrisis prompted banks to increase capital adequacy ratio but weaken the bank’srisk-taking.