The Influence Of Monetary Policy On Credit Of Commercial Banks Under The Restriction Of Capital Regulation

Since the outbreak of the international financial crisis, it has been 7 years. In the 7 years, the banking industry has suffered a series of serious shock, and many countries in the world have reached a consensus on strengthening financial supervision, especially capital regulation. In 2010, the introduction of the "Basel Accord 111" made the banking industry began to face more stringent regulatory requirements. As an important part of the new accord, strengthening the supervision of capital adequacy ratio has become the necessary conditions for establishing and perfecting capital constraint mechanism after the crisis, in order to guarantee the stable operation of commercial banks. Subsequently, China promulgated the "commercial bank capital management approach (Trial)", capital regulation has become more stringent, more severe penalties. With the change of capital regulation from loose to strict, there is a big difference between the actual effect of monetary policy and the traditional analysis method. Historically, the United States and Japan and other countries have suffered varying degrees of credit crunch after the implementation of the regulatory system. In order to meet regulatory requirements, commercial banks are bound to adjust credit decisions, however, this adjustment would affect the effectiveness of monetary policy. The unique institutional background and the characteristics of the transition of the Chinese economy determine that the experience can not be obtained directly from foreign studies. In view of this, in the context of a new round of capital regulation, it is very important to study the influence of monetary policy and capital regulation on the credit of China’s commercial banks.The interaction between monetary policy and capital regulation is seldom studied in China, so based on the Kopecky and VanHoose (2004) monetary credit model, in this paper, it is simplified and modified, and incorporated into the regulatory penalty factor, then constructs a model of bank credit under the dual restriction of monetary policy and capital supervision. Theoretical analysis results show that:(1)When the actual capital adequacy ratio of the commercial banks is higher than the minimum capital requirements, because the capital is adequate, the capital adequacy ratio constraint will not have an impact on bank credit. (2)When the actual capital adequacy ratio of the commercial banks is lower than the minimum capital requirements, banks are subject to the dual constraints of monetary policy and capital regulation. In order to meet capital regulatory requirements, these banks will have to tighten credit. The more stringent capital regulatory requirements, the lower the sensitivity of bank credit to monetary policy, the weaker the effect of monetary policy.To verify the results of the theoretical analysis, in this paper, a dynamic panel data model is established by using the data of 64 commercial banks in China from 2004 to 2014. The empirical test is conducted on the relationship between monetary policy, capital regulation and bank credit. The empirical results show that:(1)Monetary policy is effective, which is represented by the statutory deposit reserve ratio, the money supply growth rate and the one-year benchmark lending rate. And tight monetary policy can still tighten credit for commercial banks. (2) The more stringent capital regulatory requirements, the less the bank’s credit.(3)There is interaction between monetary policy and capital regulation, and capital regulation reduces the sensitivity of the credit of commercial banks to monetary policy. (4)The influence of monetary policy and capital regulation on different types of commercial banks’ credit is different, and the impact on the large state-owned banks is relatively weak.