Effect Of Interbank Business Of Commercial Bank's Counter-cyclical Capital Buffers

For a cyclical problem of capital buffer in commercial banks in China, there are many theoretical and empirical analysis, the current mainstream view is that the capital buffer in commercial banks in China is counter-cyclical, which coincides with Basel Committee's advocation to establish counter-cyclical supervision, strengthen banks' ability of resisting risks. This paper argues that the smaller the denominator of the capital adequacy ratio becomes through interbank business, the higher the capital adequacy ratio looks. And the higher the ratio looks, the more leverage the banks will increase by taking the excess. However this leverage is not unlimited; banks should still consider the real size of the risk that they can bear rather than make a profit by blindly avoiding supervision. So the more risky assets the banks hold, the more buffers they will need to cope with the risks that may occur.The empirical analysis model in this paper was based on the theoretical model here in Ayuso et al. (2004) used by the banks in the capital buffer cyclicity between 1986 to 2000 in Spain, carried out empirical analysis using the related unbalanced panel data in 131 commercial banks in China from 2000 to 2013. First, it proved that the capital buffer is indeed counter-cyclical in the banks in China. Then, three explanatory variates with the proportion of industry were added in the model, the analysis drew the conclusion that the proportion of the interbank assets has a positive impact on the capital buffer, i.e. the higher the proportion of interbank assets is, so is the capital buffer. Finally, empirical analysis is the core content in this paper. The paper divided the sample into one sample group of a higher proportion of the interbank and the other of a lower one, estimated them respectively by controlling other variates, and finally found that interbank assets have a weakening effect on the counter-cyclical of the capital buffer of commercial banks.In order to better maintain the stability of the financial system and promote the healthy development of interbank business, it is necessary to implement more effective supervision on the conduct of the interbank business, not only to strengthen the management from micro practices, but also supervise appropriate indicators from a macro total amount, to control the potential risks.