The Study On The Incentive Compatibility Of Capital Regulations Of Commercial Bank In China

The global financial supervision emphasizes the incentive compatibility,and the harmony of the targets between financial institution and the supervisor.Capital regulation has always been the core of banking supervision system,only maintaining the adequate capital,commercial bank can improve the ability to withstand risks and reduce the spillover effects on the real economy,but if blindly raise regulatory standards, not coordination of financial institutions,will increase the operating costs of banks,and result in the loss of profit opportunities,or even cause a serious moral hazard problem,this is not conducive to the healthy development of the bank.So it is necessary to do some researches about the incentive compatibility of banking regulations, It can improve the efficiency of supervision,and promote the stable and healthy development of the commercial banks.This paper takes "commercial bank's capital management regulation"promulgated in 2012 became the latest regulatory capital standards as an opportunity,According to the concept of incentive compatibility,this paper analyze the incentive compatibility characteristics of China's capital regulation,quantitative estimates incentive compatibility degree of capital regulation,and proposed some suggestions to enhance incentive compatibility of capital regulation.Based on the concept of incentive compatibility that the degree of consistency of the targets between financial institution and the supervisor,this paper uses the correlation coefficient to estimate the degree of incentive compatibility.find that incentive compatibility degree of capital regulation is in a positive excitation interval.In order to further research the incentive compatibility of capital regulation,this paper use"SPL"targets of the commercial banks as the dependent variable,capital regulatory objectives as the independent variable,develops a regression by GMM to empirically study the incentive compatibility of both targets.the empirical results show that the capital adequacy ratio and the ultimate profitability goal of commercial banks are not contradictory, core capital adequacy ratio will increase the profitability of banks.The credit risk reduction effect of capital adequacy ratio regulation is not significant,while the buffer of capital adequacy ratio can effectively reduce the rate of bad debt,that means only encourage the voluntary willingness of increase capital to achieve incentive compatibility can realize incentive compatibility.capital adequacy ratio regulation can not play a significant effect to liquidity of commercial banks,therefor need to design a specifically liquidity risk management for commercial banks.Next through the function curve fitting of the regulator'objective as well as the commercial banks'objective,we find that an range optimal level of capital adequacy ratio is in the 12.5%-12.7%.,fully illustrated that in this range the capital adequacy requirements can comply with the regulator and the regulated target,that is able to meet the requirements of each of the parties and then achieve the incentive compatibility of capital regulation.Finally,on the basis of incentive compatibility characteristics of capital regulation and quantitative analysis,some advices are offered for regulator to further improve our capital incentive compatibility.