Chinese Commercial Banks' Capital Adequacy Impact Of Regulation On The Credit Transmission Channels Of Monetary Policy

In recent years, the global economy has in face a series of challenges of thefinancial crisis, and the European debt crisis. The banking sector has been a greaterimpact, Countries reached a consensus to strengthen supervision of financial, Newregulatory standards of the banking industry "Basel III" was formally promulgated in2010, Means that the banking industry began to face more stringent regulatoryrequirements. China issued a "commercial bank’s capital management approach" inJune2012, More stringent regulatory requirements for capital adequacy ratio ofChina’s banking industry. The transmission mechanism of monetary policy, the bankcredit channel is an important transmission channels,and the bank’s capital adequacyratio requirements closely related to the bank’s credit supply capacity, Therefore, thestudy of regulation bank’s capital adequacy ratio impact on the Credit Channel ofmonetary policy has great significance.The paper is divided into the following sections:First, the Introduction introduced the significance of this study and scholars athome and abroad on research about the subject, and introduced the ideas of thisresearch, the paper structure and main innovation.Secondly, through theoretical analysis of the bank’s capital adequacy ratio onthe impact of monetary policy.The bank’s capital adequacy ratio in the course of theanalysis will be divided into three cases: The capital adequacy ratio satisfyingregulatory requirements; The capital adequacy ratio not satisfying regulatoryrequirements, but the bank can expand capital through external channels to meet theregulatory standards of capital adequacy ratio; The capital adequacy ratio did notsatisfying regulatory requirements and can not expand capital through externalchannels, can only to contraction loans to improve the capital adequacy ratio to meetregulatory requirements. Based on the bank’s capital adequacy ratio of the threecases, Analysis of the banks in different circumstances,impact on the credit channelof monetary policy. Finally, take the method of empirical analysis, analysis of China’s capitaladequacy ratio regulation impact on the monetary policy transmission. The empiricalpart is divided into two main: One is the use of panel data model, Select the14commercial banks in order to analyze the regulatory of the capital adequacy ratioimpact on the bank credit supply capacity. After from the perspective of a singlebank, Select the data more fully6commercial banks, Consider the banks in thedifferent monetary policy and the behavior of expansion capital, Analysis capitaladequacy ratio regulation impact on the Credit supply.By theoretical analysis have the following conclusions: If the bank’s capitaladequacy ratio satisfying regulatory requirements, regulatory capital adequacy ratiohas no effect on the transmission of monetary policy. If the bank’s capital adequacyratio did not satisfying regulatory requirements, but banks can through the externalchannel expansion capital to improve the capital adequacy ratio, regulatory capitaladequacy ratio also has no effect on the transmission of monetary policy. When thebank’s capital adequacy ratio unable to satisfying regulatory requirements and thebanks can not expansion capital through external channels, the bank can only shrinkloans to improve the capital adequacy ratio, In this case, regulatory capital adequacyratio will impact on the credit transmission channel of monetary policy. If it is in theaccommodative monetary policy, it will make the effectiveness of monetary policywould be seriously compromised, can not achieve the intended effect of the policy. Ifit is in the tightening monetary policy, the size of the bank’s credit have a greatercontraction in the under the dual Restriction of tightening monetary policy andcapital adequacy regulation, The effects of monetary policy will be more thanexpected.The empirical results are as follows: In the analysis of panel data model, thesimple regression results show that: not significant correlation between the capitaladequacy ratio and the size of credit. Fixed effects analysis showed that the differentbank’s capital adequacy ratio impact their credit scale is different. Grangercausality test results show that the result of6bank’s Granger causality test between capital adequacy ratio and credit scale is different. Consider the type of monetarypolicy and the behavior of bank’s expansion capital found that the bank’s capitaladequacy ratio no direct effect on the bank’s credit and the transmission of monetarypolicy.The final conclusion on the basis of theoretical analysis and empiricaltesting:when China’s commercial banks are constrainted by the capital adequacyratio, they can expansion capital through external financing channels, to improve thecapital adequacy ratio, and don’t need to shrink the size of loans.So, regulatorycapital adequacy ratio no real impact on the transmission of monetary policy. Alsopointed out that at the end of this article: A greater impact on the size of bank creditis the central bank’s credit scale indicators and loan-to-deposit ratio of regulatoryindicators.