Research On The Bank 's Risk - Taking Channel Of Monetary Policy

The 2008 global financial crisis originating in the United States completely changed the way people think about the loose monetary policy, and how to balance the stability between price and finance became a hot spot of financial concerns. This financial crisis not only proposed deficiencies in financial regulation, but put forward the query about the long-term loose monetary policy. The long-term low interests of loose monetary policy leads to the excessive expansion of credit scale, generates asset price bubble and exacerbates the risk-taking of financial institutions. To a certain extent, monetary policy has led to the risk-accumulation of whole financial system.This paper, by establishing GMM estimation model, investigates the effects of momentary policy on bank’s risk-taking and verifies the existence of risk-taking channel; meanwhile from a prudential supervision perspective, combining theoretical and empirical evidences, analyzes the way how bank’s capital adequacy level, the level of leverage, liquidity, loss reserve status and other microscopic behaviors affect monetary policy transmission by influencing credit decisions and tests the heterogeneity of risk-taking channel in momentary policy, according to the dynamic panel data of 14 publicly traded Chinese commercial banks from 2003 to 2013.The first part of the article analyzes the research background and its significance, defines the scope of this paper, and regulates the overall research ideas and frameworks, as well as the questions to explain, from the angle of research purpose. The second part demonstrates and comments the literature in home and abroad. It is indicated that the research on the channel of abroad monetary policy mainly concentrates on the impact of monetary policy on bank risk-taking, and the heterogeneity of risk-taking channel from the perspective of bank’s traits. Compared to the foreign counterparts, the domestic research was started relatively late, especially the literature concerning heterogeneity impact. The third part illustrates the evolution process of risk-taking channel of monetary policy, compares the differences between conventional monetary policy and risk-taking, analyzes the impact of monetary policy on bank’s risk-taking at the basis of D-L-M model, and summarizes the transmission mechanism of risk-taking channel. In addition, the fourth section theoretically discusses the heterogeneity impact on capital regulation, regulatory leverage ratio, liquidity regulation, loan loss provision regulation of bank’s risk-taking channel. Furthermore, it proves that Chinese loose monetary policy can increase bank’s risk-taking and prudential supervision is able to weaken the risk influence of monetary policy. Eventually, the final section draws the conclusions and policy recommendations. It states that the macro and micro prudential supervision should coordinate the current momentary policy, raises the capital adequacy ratio, leverage, liquidity, loan loss provisions and other regulatory standards, establishes more forward-looking, organic-united prudential institutional arrangements, which based on the comprehensive assessment of existing system of prudential supervision effectiveness.