An Empirical Study On The Impact Of Capital Adequacy Ratio On China 's Commercial Banks' Credit

As the last line of defense to prevent risks of commercial banks, capital regulation is the key to prudent banking supervision. The formal issue of the1988Basel Capital Accord marked the capital regulation became a common international standard for banking supervision. Since2004, China’s capital supervision have stepped into the materiality implementation stage, we need to further explore the impact of capital adequacy ratio on the bank loans, which is of great significance for banking risk management, and the role of capital for the bank lending channel of monetary policy is worth pondering. China is now in a period of economic transition, to the mode of the operation management of the capital-saving stands for the future development of the banking sector.Based on the panel data of China’s listed commercial banks, we study the impact of the capital adequacy ratio on the credit of China’s commercial banks and try to put forward feasible policy recommendations for the transmission mechanism of monetary policy in China. In this dissertation, we adopt a method using dynamic panel model for the total regression analysis, a comparative analysis of different classes, and for different periods.The thesis is divided into four parts. Chapter1is the Introduction. Chapter2is the literature review and mechanism analysis. To begin with a literature review at home and abroad, it includes both theoretical research and empirical research. Then we carry out the mechanism of the impact of the capital adequacy ratio on the commercial bank loans in China. At first, we interpret the effects from the angles of the monetary policy effects and the credit crunch effect. Based on the Kopecky-VanHoose model, we divide the derivation of the mechanism into three categories according to the adequacy level of the CAR. And the mechanism derived demonstration that the bank with adequate capital level is conducive to the growth of bank loans, but also conducive to the optimal level of capital, at the same time, the establishment of the minimum capital adequacy ratio by regulatory authorities should be greatly prudent. Chapter3is the empirical analysis of the impact of the capital adequacy ratio on the credit of China’s commercial banks. First, the overall regression results find that the capital adequacy ratio is a positive influence of loan growth, the capital regulatory pressure is a negative influence, and the impact of capital regulatory pressure on bank loans have asymmetric effects,that is banks with adequate capital play a much greater extent for credit expansion than the undercapitalized banks do; additionally, the higher the capital adequacy ratio, banks are more conducive to play the function of the bank credit channel, and the loan growth of smaller banks lacking of capital is low. Then we divide the overall banks into two major categories:large banks, small and medium-sized banks, and the classified research discovers that the improvement of capital adequacy ratio for large banks than small and medium-sized banks is more conducive to the expansion of credit, however, small and medium-sized banks under the capital regulatory pressure have stronger banking lending channels effect. Finally, the supervision of China’s capital after the financial crisis since2008has been significantly strengthened, with more powerful capital regulation, but the effects on the bank lending channel is still not significant. Chapter4is the result and the policy recommendations including several ways of the dynamic management of the capital adequacy ratio.