Empirical Research On The Pro-cyclicality Of Capital Adequacy Ratio In Commercial Banks Of China

The capital regulation of commercial banks is both the core content of modern financial regulation and the key to guarantee the sustainable development of the bank’s stability.As the financial crisis causing varying degrees of impacts on the global economy, people paid close attention to the financial regulatory problems such as the pro-cyclicality of financial system, and the international regulators have put forward a series of regulatory reform suggestions.Referring to the provisions on macro-prudential regulation framework in Basel Ⅲ,the counter-cyclical capital regulation in our country aiming at releasing the pro-cyclicality of capital regulation is the top priority in recent years.As we all known,capital adequacy ratio is the measure of capital regulation,so the important content of macro-prudential regulation in our country is to ease the pro-cyclical effect.Today is an new era after crisis, what our country should do is to seek the sustained economic growth, the financial prosperity and steady without ignoring pro-cyclicaity of capital adequacy ratio. So,one of the current problems is that study the pro-cyclical effect of capital adequacy ratio, and then give some useful suggestions for counter-cyclical capital regulation,so that we can weaken the pro-cyclicality of financial system, reduce the risk of financial system, promote the stable and secure operation of commercial bank and finally make the macro-economy growing sustainably.In this paper, we studied the pro-cyclicality of capital adequacy ratio mainly from the theoretical and empirical aspects. In the theoretical part, we reviewed the domestic and foreign scholars’ issues related to the main research achievements, and then analyzed the theoretical questions of the pro-cyclicality, including the reasons and the consequences of the pro-cyclicality of capital adequacy ratio.Before the empirical analysis, we discussed the status of the capital adequacy ratio and economic development in our country by data and graphs, finding that the capital adequacy ratio of our commercial banks has a counter-cyclical feature.In the empirical part,we use the panel data of 20 commercial banks from 2003 to 2013 for linear regression analysis.What can we know is that the capital adequacy ratio of our commercial banks is counter-cyclical indeed. On the one hand, the reason is that most commercial banks are prospective and they withdraw the capital buffer counter-cyclically,in other words,they adjust their capital assets and credit assets in different stages of economic.On the other hand, our country carried out counter-cyclical monetary policy during the whole sample time.Last but not least,we got some suggestions for our commercial banks and regulatory authorities respectively because only they cooperate harmoniously can we truly achieve the goal of macro-prudential regulation in our country.