The Impact Of Capital Constraint On Chinese Commercial Banks’ Credit Behavior

Begin from 1980s when capital adequacy requirements are written into the "Basel II",capital constraints caused some impact on banks in different countries. The phenomenon ofthe credit crunch appeared in many developed countries. Under the background of furtherstrengthen of capital constraints, this paper studied the impact of constraints of the capitaladequacy ratio on commercial bank credit quality and credit scale.First, we study the theoretical basis of banks’credit behavior, capital constraints and theimpact of capital adequacy ratio requirement on banks’credit behavior. And we usedKopechy-Vanhoose mathematical model, the bank credit channel and the bank capital channelanalyzed the influences of capital adequacy ratio requirement on different kind of banks. Thetheoretical basis showed that the capital constraints have strong impact on banks. Strengthenthe constraints of the capital adequacy ratio will impact banks’credit behavior and the impactdifferent from banks.Then, basic on the theoretical analysis, the author respectively rated the credit quality ofdifferent kind of banks by constructing bank credit quality evaluation system. The ratingresults show that the credit quality of state-owed banks, city commercial banks and joint stockcommercial banks’improved after the strengthen of capital requirement. The improvement ofstate-owed banks are bigger the other kinds of banks. And using panel data between 2003 and2011 from 18 banks, the paper also did empirical research of the impact of the capitaladequacy ratio requirement on Chinese bank credit scale. The author introduced a dummyvariable to find the effect time point of different kinds of banks and used segmentedregression to examine the impact on state-owed banks and city banks’credit scale and thedifferences between these two kinds of banks. The results show that the effect time point andthe impact of different types of banks were different. The effect time point of state-owedbanks is 2007. The effect time point of city commercial banks is 2006.Finally, this study proposed advises and policy to reduce the adverse impact of capitaladequacy ratio requirement on Chinese banks. We can eliminate the adverse impact from thefollowing ways: 1、establish a sustained, moderate, economic and transparent regulationconception;2、build the framework of incentive compatibility capital adequacy rationconstraint;3、change the growth pattern of Chinese banks;4、reduce the banks’non-performance loan;5、expand banks’capital added channel.