Research On China’s Bank Risk-Taking Channel Of Monetary Policy

The financial crisis beginning in2007take the global financial system negative influence on banking system. Most scholars put the blame for the crisis on continued loose monetary policy (low interest rate policy) in America since2002,which is considerated to encourage the bank’s over-risk-taking. Based on the relationship between monetary policy and bank risk-taking, Borio and Zhu (2008) puts forward a new monetary policy transmission channel of monetary policy for the first time in one of their working papers-the Risk-taking channel of monetary policy. The meaning of this new channel is that:monetary policy can change banks’risk identification and tolerance by influencing the value of assets, financing cost and risk pricing. Thus it will affect its loan pricing and investment decisions, then ultimately make effects on the real economy and financial stability. This channel reveals that the commercial banks and other financial institutions are not neutral and passive in the monetary policy transmission process.To clarify the monetary policy effect on bank risk-taking will be benefit not only for commercial banks to strengthen managements,but also for monetary authorities to improve policy effectiveness.It can also contribute to financial stability.In the existing literature, foreign scholars have explored a lot on the monetary policy transmission channels theory, and t achieved some valuable results. But at present, there is few research in this aspect in China.The paper is composed of six parts, aiming at researching on China’s bank risk-taking channel of monetary policy by the numbers:The first part is the introduction, which introduces the background, significance and research contents of the article. The second part is a summary of some classical literature. In this part, the paper involves in three aspects including the traditional monetary policy transmission theory, the influencing factors of bank risk-taking and the bank risk-taking channel of monetary policy. The third part talks about some fundamental theory analysis. At first, the paper defines the concept of bank risk-taking. And then, it analyzes theory mechanism and influencing factors of the bank risk-taking channel of monetary policy. The fourth part and the fifth part are empirical study. The paper constructs three models to study the existence, heterogeneity and asymmetry of China’s bank risk-taking channel of monetary policy. The paper conducts an unbalanced data panel using the micro data of45commercial banks in China during2004-2013and the macro data for ten years balanced panel data. Also, it use the differential GMM estimation method to carry out on the regression, and make the economic interpretation. The last part is a conclusion. Finally, according to the research conclusion, this paper puts forward the corresponding policy recommendations from two angles of the micro level and macro level.The main conclusions of this research include:(1)The monetary policy of our country risk taking channel exists, and the loose monetary policy will stimulate banks to assume more risk.(2) The monetary policy of our country risk taking channel is heterogeneity, banks with bigger assets scale and more adequate capital can resist the monetary policy shocks more effective, and the profitability of the bank will make itself more sensitivity to monetary policy shocks.(3) The monetary policy of our country risk taking channel is asymmetry, the impact of expansionary monetary policy on bank risk-taking is stronger than the tightening. This may be related to the generally existing banking credit expansion impulse in our country.