The Countercyclical Study Of Capital Buffer And Lending Behavior

Based on the study of relevant literature and the economic analysis, this paper firstly analyzes the cyclicality of capital buffer and lending behavior and study how capital buffer affects lending behavior from theoretical aspect. Then tests empirically the cyclical behavior of bank capital buffers and credit growth by use of the panel data of 40 commercial banks from2004 to 2014. The results show that in China:(1) the capital buffers are countercyclical, and there exists a countercyclical effect for Systemically Important Banks and banks with high capital ratio, however the capital buffers of banks with low capital ratio are procyclical.(2)The credit growth also takes on a countercyclical behavior, the credit growth of Systemically Important Banks are more countercyclical and there exists a significant countercyclical effect for banks with high capital ratio.(3)Capital buffers are negatively related to credit growth and capital buffer adjustments help to enforce the countercyclical behavior of the credit growth. Based on the above empirical results, this paper proposes policy recommendations about the countercyclical capital regulation. The regulatory authorities should establish different regulatory policies according to the characteristics of the banks, improve the framework of prudential regulation, reduce the risk, and promote the stability of our financial system.