An Analysis Of The Relationship Between Capital Adequacy And Management Risks

As a country’s economic hub, the stability of commercial banks directly relates to the security of the financial system。 An adequate of capital is the necessary prerequisite to safe management. The amount of capital is closely related to the bankers’ appetite. In order to reduce bank management risks, lots of developed countries have implemented the relevant provisions on capital adequacy of the Basel agreement. Since2004, Chinese regulators have issued several capital regulations. In2012July, China issued the "Commercial bank capital management approach (trial)". It means that the relationship between capital adequacy and bank management risks has gradually gained attention, but commercial banks management risks are needed to pay attention. However, the article systematically analysis the relationship between capital adequacy and commercial banks management risks in China from qualitative and quantitative perspectives.This paper applies the GMM technique for dynamic panels using bank-level data for22Chinese commercial banks over the period2004-2012to investigate the impacts of capital adequacy on bank management risks. The structures of this paper are as following:At first, this paper makes a survey on relevant domestic and foreign literatures and the corresponding summation. Next, this paper summarizes the related theories of capital adequacy and management of commercial bank. Based on this, we analysis commercial banks capital adequacy and risk status. Then, we establish a dynamic panel-data model to make an empirical test. In this part, we test the relationship between all the samples and the relationship between full sample and bank management risk at first, and then we divided the full sample into two sub-sample to make robust test. At last, we give some ideas to commercial banks managers and authority about how to give full play the effectiveness and how to reduce commercial management risk.The mainly contributes are as following:(1) There is a large difference among state-owned Banks, joint-stock Banks and city commercial banks in capital adequacy and management risks.(2) It is not obvious that capital adequacy could reduce Chinese commercial banks management risks.(3) City commercial banks management risk is more sensitive to capital adequacy than state-owned Banks and joint-stock Banks.(4) Loans, liquid assets and supervisory power are all the main factors to effect management risks.(5) For commercial banks, a good way to enrich its capital adequacy is accumulate by itself. At the same time, authority also need perfect the capital requirement rules.