Study On The Bank Risk-taking Channel Of Monetary Policy-from A Perspective Of Size Of Bank And Moral Hazard

When monetary policy rate changes，bank risk-taking will be affected. Wheninterest rates decrease, the banks will improve their risk-taking tendencies because of“low interests rates affect valuations”“search for yields” and so on. This, in turn,affects the effect of monetary policy. Therefore, bank risk regulation is very important.Despite banks with larger assets sizes have a certain ability to disperse risk, risk isstill alive. If a bank considers itself "too big to fail", government won’t allow it to fail.It would raise its risk-taking and search for higher yields because of moral hazard.The object of this paper is to study the effects of size on risk of commercialbanks based on the risk of monetary policy transmission channel. This researchcontains several aspects of content: the first is bank risk-taking channel. Bankrisk-taking channel is that monetary policy interest rates affect risk of banks, whichmeans that banks’ behavior will raise uncertainty. The second is to study thedifference of channels of banks of different sizes, and to explore whether lager bankstake more risk because of moral hazard caused by "too big to fail".The third is tostudy the influence of bank size on the level of risk without considering monetarypolicy.According to the point of view above, this paper studies the bank risk-takingchannel of monetary policy in our country under the background of existing problemof “too big to fail”. Combing the relevant literature, this paper does theory analysis ofrisk-taking channel of monetary policy, and analyzes influence of problem of “too bigto fail”. In the empirical part, this paper, by using China’s14listed banks in the thirdquarter of2008to2013in the third quarter of the quarterly data as well as economicand financial data in China during this period, does empirical research with theHansen (1999) threshold model and GMM estimation. Through theoretical analysisand empirical analysis, this paper found that risk-taking channel of monetary policyexists in our country, and this channel will be influenced by “too big to fail”, and thatlager banks have greater risk-taking tendencies. Moral hazard exists, and the problemof “too big to fail” has an influence on risk-taking channel of monetary policy.According to the theoretical and empirical analysis results, this paper put forward relevant policy suggestions that the risk of bank should be kept under strictsupervision and the deposit insurance system should be built quickly.