Empirical Analysis Of The Relationship Between New Regulatory Policies And Banks’Risk

Banking is a risky industry, because it has a little capital but a large amount of asset. As we know, banking is an important industry in China, and it also takes an important position in the financial industry, which provides strong support for the development of the real economy. If banking has a crisis, that will affect the real economy in our country, even cause serious harm to the development of China’s society. Therefore, we must strengthen the supervision of the banking sector in order to reduce risk. This is an important and urgent problem.At the beginning of the last century, the world has the capital regulation on banking industry. The original form of regulation is mainly the asset-liability ratio. The Basel I was issued in1988. Then more countries began to use the indicator called capital adequacy ratio. In Basel I, different assets have different risk coefficients, and we can get the risk-weighted assets. The ratio of capital and risk-weighted assets is the capital adequacy ratio. Since then, as the content of the Basel Accords revise, capital adequacy ratio has a more accurate meaning. In2010, the Basel III is issued, which makes the calculation of capital adequacy ratio more strictly. In addition, it launched leverage, loan loss reserve, liquidity index and other new forms of regulation. In China, we follow the agreement actively. And we released many documents to promote the implement of the new regulatory policy since2011.Whether the regulatory can reduce the risk of bank or not, scholars around the world take a lot of research, but they don’t get a final conclusion. This article selects the data of16commercial banks of China from2004to2012, adding leverage, loan loss reserve and liquidity index to the model. Under the new background of Basel III, we discuss the impact of capital adequacy regulation on the level of risk of banks.Through the empirical study, we get the following conclusions. Since our country issued the regulations about commercial banks’capital adequacy ratio in2004, the level of capital adequacy ratio of our countries’banking continues to improve. It remains above12%now, and is higher than the latest requirement. On the contrary, the non-performing loan ratio continues to decline, and is steady at1%.The capital adequacy regulation can reduce the bank’s risk level effectively. Keeping good liquidity can do that, too. Leverage can improve capital adequacy ratio, but it doesn’t reduce the risk. So we must be careful when we use the index of leverage. The loan-loss coverage ratio can improve the capital adequacy ratio to a certain extent.In view of this, this paper puts forward some suggestions. Regulators should strengthen the capital regulatory and establish a reasonable regulatory system according to the national conditions. They should use a variety of indicators reasonably to adjust banks’ behaviors in order to reduce the level of risk. The banks should observe the regulatory policy and enrich the supplement way of capital. At the same time, they should establish a system to control risk. Also, they can find the balance of capital and risk through practice.