The Profit Efficiency Research Of Small And Medium Commercial Banks Under The Capital Regulation

Capital regulation is consistent core of three generations of Basel Accord, from the1988Basel Capital Accord first put forward a unified capital adequacy ratio, to the2004New Basel Capital Accord extended capital adequacy ratio to three major capital regulatory framework, to the introduction and implementation of Basel Capital Accord Ⅲ said to be the most stern capital regulation reform, which all highlight the important role of capital regulation in banking supervision. Aims at increasing the risk resistance ability of commercial banks by controlling the minimum capital, which is the core of capital regulation, but it also virtually has an impact on the objective of maximizing profit efficiency. Especially compared with large banks, small and medium commercial banks, which have disadvantages on the scale benefit, innovation ability, market control force as well as policy treatment, will make no doubt of suffering greater impact by capital regulation. Thus, the profit efficiency of small and medium commercial banks and the influence of capital regulation on it are the focuses of this paper.The profit efficiency of commercial banks established on the basis of profit maximization is to investigate the inputs and outputs of banks, which is if the bank can obtain maximum output in the given inputs or whether to choose profit maximization output combination. Based on carding and reviewing the related literatures, this paper find that the profit efficiency of small and medium commercial banks is different from each other, also has great influence by capital regulation. Therefore, we select the related data about10listed small and medium commercial banks as a sample, use stochastic frontier approach to measure the profit efficiency of sample banks from2006to2010years, and on this basis use regression analysis method to further test the relationship between profit efficiency and capital regulation index such as capital adequacy ratio, loan-to-deposit ratio, provision coverage ratio, liquidity ratio and leverage ratio. The results show that: 1. From the achievement of profit efficiency, the average profit efficiency of small and medium commercial banks is only0.6649, that is33.51%profit efficiency is loss, and there is a large gap between the sample banks, the profit efficiency of small and medium commercial banks in China still has much room for improvement. Therefore, the small and medium commercial banks cannot compare with large banks in scale competition, these banks should seek a suitable development path, avoid blind scale competing, walk a characteristic development road.2. From the influence of capital regulation to the profit efficiency of small and medium commercial banks, capital supervision index such as capital adequacy ratio, loan-to-deposit ratio, provision coverage ratio, liquidity ratio have some influence on the profit efficiency, but leverage ratio has no effect on it. The capital adequacy ratio, loan-to-deposit ratio and liquidity ratio have significant effect on the profit efficiency; provision coverage ratio has little effect on the profit efficiency.3. Implementing much more strict regulation on small and medium commercial banks will make their ability of resisting risk significantly enhanced, but also lead to their risk preference tend to be conservative, credit scale reduce, financing cost increase, thereby affect their profit efficiency. In the circumstances about interest income is still the banks’main profit resource; the credit tightening effect about capital regulation is particularly evident in small and medium commercial banks. Therefore, regulatory authority according to the development of small and medium commercial banks to determine a reasonable capital regulatory index is significant to the development of small and medium commercial banks in China and also important to the whole China banking industry.