Research On The Influence Of Monetary Policy On Bank Risk-Taking

The traditional monetary theory ignored the impact of monetary policy on bank risk-taking, but the financial crisis in 2008 aroused think and consideration of scholars and monetary authority to the financial stability issues. Commercial Banks gain profit through risk-taking and risk management, the bank’s risk identification and risk appetite play an important role in the monetary policy transmission mechanism and economic cycle fluctuations. The impact of monetary policy on bank risk-taking is related to the efficiency of monetary policy transmission mechanism. Under the specific financial system in our country, the impact of monetary policy on bank risk-taking is crucial, which will be the necessary premise of macro-prudential regulation to monetary policy, final achievements of monetary policy and steady development of Chinese economy.This paper studies the influence of monetary policy on bank risk-taking. Firstly, this paper arranges the literature review of impact of monetary policy on bank risk-taking and introduces current situation of this research at home and abroad. The article sums up the mechanism of the impact of monetary policy on bank risk-taking (such as the income effect, the profit mechanism habit formation and reaction mechanism). Based on micro data of 44 domestic banks and macro data of economy and finance between 2005 and 2013, this paper tests the impact of monetary policy on the bank risk-taking and make a contrast of monetary policy on bank risk-taking before or after the financial crisis. Also the article examines that whether the relationship between monetary policy and bank risk-taking is affected by the bank size or not. Empirical evidence shows that there is a negative correlation between monetary policy and bank risk-taking behavior. Expansionary monetary policy will stimulate bank risk-taking. Bank risk-taking is positively correlated with the GDP growth. This paper finds that the sensitivity of the bank’s risk to monetary policy after the financial crisis is lower. Meanwhile the absolute value of coefficient in large size banks is lower than the absolute value of coefficient in medium and small size banks, which shows that the sensitivity of risk-taking in large size bank to changes of monetary policy is lower. Results suggest that monetary policy significantly affect bank risk-taking, which is impacted by the economic and financial environment and the characteristics of the size of banks.This paper suggests that monetary policy makers should pay more attention to the bank risk taking; Our country monetary policy should be incorporated into the macro-prudential regulation framework, strengthen the coordination with regulation policy and improve the reform of financial regulation to promote the development of financial stability.