Study On Risk-taking Behavior Of Commercial Banks In China Under Counter-cyclical Regulation

In December 2010, the Basel committee promulgated Basel III and established the counter-cyclical regulation framework under macro-prudential regulation in order to ease commercial banks pro-cyclical problem caused by defects and insufficiency of capital regulation model under the Basel II, strengthen capital regulation and improve banks risk resistance capacity. Countercyclical regulatory tools involved are the requirements about capital adequacy, countercyclical capital buffer, leverage, liquidity and loan loss provision. But at present, researches on macro-prudential regulation and its counter-cyclical regulation have mainly focused on the macroscopic level such as macro financial stability and financial regulatory reform, but have paid less attention to micro level as how countercyclical regulatory affects banks' microscopic behavior. As a result, j udging countercyclical regulation's theoretic impact on banks' risk-taking behavior and its mechanism, inspecting different types of regulatory tools' actual influence on banks' risk-taking behavior contribute to a more comprehensive evaluation of counterc yclical regulatory policy effect and guide China's commercial banks to adjust their risk-taking behavior.Based on mentioned above, this paper learns from Cordella and build a theoretical model of how bank decides its risk-taking level under counter-cyclical regulation in order to analysis mechanism of counter-cyclical regulatory tools' impact on bank risk-taking. Then it chooses the proportion of risk-weighted asset to total assets and Z-score to evaluate commercial banks' risk-taking level from the eagle of asset allocation and operating stability respectively. Further, this paper selects 26 representative commercial banks during 200 4-2013, uses the single-step system GMM estimation method to discover the relationship of counter-cyclical regulatory tools and the level of bank risk-taking level. The empirical results show that relationship varies from bank to bank. Improving capital adequacy requirements will effectively suppress the state-owned commercial banks, joint-stock commercial banks' risk-taking behavior, but have a limited effect to city commercial banks; leverage ratio requirement will lead to adverse selection and moral hazard, all of the three banks are more likely to hold risker assets, thus raise the level of risk-taking; liquidity requirements only prevents state-owned banks from taking more risk; and loan loss provision will only stimulate city commercial banks choose a higher level of risk. Finally, this paper points out that under the guidance of counter-cyclical regulation, what commercial banks themselves should do to overcome the pro-cyclical problem, control risk level and maintain bank stability. Adjustments can be made in the following fields: improve asset structure, build capital replenishment mechanism, and optimize credit mode, develop intermediate business, create scientific performance appraisal system and comprehensive risk management.