Research On The Procyclicality Of Capital Restriction Of Commercial Banks In China

Pro-cyclical capital regulation, simply speaking, is regulated by the supervision department of regulatory capital requirements which will affect the commercial bank credit and asset portfolio behavior, through the credit activities to promote economic volatility impact and increase economic volatility. In the economic downturn, credit risk increases, the probability of default increases, and asset quality measured by the risk correspondingly declines,then the bank’s credit behavior will become cautious,which leads to the inhibition of the macroeconomic.In economic upward period, credit quality will be improved significantly, asset quality will become good, and the regulatory capital will be reduced accordingly, then banks tend to enlarge credit scale.the credit expansion will stimulate further economic prosperity.In fact, the Procyclicality of the supervision capital has been recognized for a long time. In the wake of the financial crisis, the financial system of the pro-cyclical, especially the pro-cyclical capital regulation has become one of the focus of theory and practice. As strengthening macro-prudential regulation, buildiing macro-prudential and micro organic combination of prudential supervision of financial regulatory framework has become an international consensus, studying the existence of capital regulation pro-cyclical, transmission mechanism and the size of the effect, is of great significance for China’s banking industry and establishing an effective capital framework of steady operation.Generally speaking, in this paper, we make a comprehensive study of the theory firstly by adopting the method of comparative analysis, qualitative analysis. Secondly, we reviews the development course of capital regulation in our country, and analyzes the status quo of regulatory. Then on the basis of the above two, and with reference to foreign empirical model, we use the panel data of listed commercial Banks in China to demonstrate the existence of pro-cyclical capital regulation in our country. Finally, based on the above theoretical and empirical sisis,we put forward some measueres to release pro-cyclical capital regulation.The main viewpoints of the paper are as follows:(1) there are three mainly transmission channel of the main point of the Banks’ capital constraint:bank capital, regulatory capital and excess capital. The first channel is that by economic fluctuations affecting the Banks’ capital, banks are compelled to adjust the credit scale under regulatory pressure,which affects capital adequacy ratio of the numerator. The second is whether excess capital channels have pro-cyclical depends mainly on the bank’s own excess capital policy or regulatory requirements.The third channel is the Banks themselves cope with economic shocks by adjusting the credit scale, which affects capital adequacy ratios of the numerator, risk-weighted assets.(2) under the condition of the implementation of regulatory capital in China, the bank’s actual capital adequacy ratio has significant negative correlation on the GDP growth rate, showing that in the economic downturn, Banks’ capital regulatory pressure increases, the bank tend to decease credit and the credit crunch will intensify macroeconomic fluctuations; In economic upward period, bank capital regulation of pressure is relatively small, after meet the basic index of capital adequacy regulation, Banks tend to enlarge the credit scale,which can stimulate the further prosperity of the economy. The capital restriction of china has pro-cyclical effect.(3) macroeconomic fluctuations can affect the change of the projects of bank’s balance sheet by the credit channel:firstly,banks will adust the scale of credit,change the configuration of the risky assets and then change the assetsstructure of the banks;secondly, in the case of regulatory capital regulation,the change of bank’s asset portfolio must also consider the regulatory capital constraint.And if the basic regulatory proportion is satisfied, the procyclicality of capital supervison is characterized by excess capital changing along with the macroeconomic fluctuation.