The Study On Effects Of Monetary Policy To Risk-taking Of Commercial Bank

What causes the2008global financial crisis has attracted the attention of manyscholars in recent years. Some of them point out that longterm loose monetary policywith sufficient liquidity would stimulate the asset price, lead to the rising of leverageratio of financial institutions, which ultimately causes excessive risk-taking. Thedomestic solid opening-up policy and strict financial regulation protect China fromsuffering much direct loss in this financial crisis, however, there is the realisticproblem of low interest, whether loose monetary policy will stimulate excessive risk-taking of banks has to be considered; thus the study of this issue has vital significance.This paper explores the risk-taking problem of commercial banks by using thepanel data of12domestic banks from2003to2012. We find that the relationship ofmonetary policy and risk-taking of commercial banks is significantly negative, andthe capital adequacy ratio plays important role in it. To examine the robustness of theresult, we choose non-performing loans ration as another proxy variable and makedynamic analysis considering the dynamic character of the risk. These two tests showthe same result, therefore we can conclude that the negative relationship betweenmonetary policy and risk-taking of commercial bank is significant.Besides, based on the empirical result and the study of both foreign and domesticscholars, this paper explores the relationship of monetary policy and macroprudentialpolicy. The result shows that whether their relationship is complementary oralternative depends on the economic condition and the capital adequacy ratio ofbanking system plays an important role. Therefore, when formulating the monetarypolicy, the central bank should handle the relationship of price stability and financialstability, and the economic condition and capital adequacy ratio of the bank systemshould be considered.