A Study On The Impact Of Capital Adequacy Regulation On Bank Performance

Banks are essentially profit-maximizing economic organizations, but because of the special capital structure and operations lead to endogenous risk, vulnerability and infectious compared with other companies, banks are subject to government strictly, including the market access system and the system of capital regulation, deposit insurance system etc, while the regulatory capital is a core position. From the evolution of the Basel agreement which is the world’s regulatory capital standards accepted by most countries, can be seen the core idea of banking regulation is controlled by capital requirements for Banks’ leverage, and allowing qualified commercial Banks using high quality risk quantification model to accounting risk parameters and risk assets, used to determine the capital adequacy ratio, and supplemented by strict external supervision and information disclosure system.The purpose of capital regulatory is to ensure the safety of the deposits of savers and prevent the banking crisis by limiting the bank’s risk behavior. The traditional economics view of that stability and efficiency replace each other has appeared for a long time, considering this aspect the regulatory capital will reduce the performance of banks, but from another point of view, the capital adequacy regulation can reduce the risk of excessive motivation, and reduce the risk of banks, improve operational efficiency, so it can improve the performance of banks. There is no unified conclusion of the impact of capital regulation on bank performance is in the academic.In this paper, I analyze the impact of capital adequacy ratio on the bank performance from the perspective of capital structure point, the angle of bankruptcy and loan loss provisions, and collect the latest data of Banks of United States and China, I have an empirical analysis of panel data model about the relationship between the capital adequacy ratio of the bank and the performance, Through the analysis, we draw the following conclusion:there is a significant positive correlation between the banks’ capital adequacy ratio and bank performance. With the enhancement of the capital adequacy ratio, the performance of banks will be significantly improved. At the same time the impact dependents on bank’ loan loss provisioning.