Research On Loan Loss Provisions Of Commercial Bank In China

This paper studies the provision for impairment of loans to commercial banks in China through empirical research method using data from 2004 to 2016 of 14 listed commercial banks.Through the research,This paper finds that the regulatory requirements of the regulatory authorities and the provision for impairment of bank loans together lead to the procyclicality of bank loans and the capital level of banks is complementary to the provision for impairment of bank loans.This paper proves that the core capital adequacy ratio is positively related to the growth rate of bank loans.The ratio of bank loan impairment and nonperforming loans is positively correlated with the growth rate of bank loans.The core capital of banks is complementary to the provision for loans of bank.It shows that the issuance of bank loans are impacted by the capital adequacy ratio and the core capital adequacy ratio.If the banks' core capital adequacy ratio at the beginning of the year is high,the banks' concern that the future capital is difficult to meet the regulatory requirements is reduced,thus expanding the loan issuance.If the banks' core capital adequacy ratio at the beginning of the year is low,the banks' concern that the future capital is difficult to meet the regulatory requirements is increased,thereby reducing the current issuance of loans.Banks which confirm the loan impairment provision in advance can reserve enough risk funds to deal with the expected loss of the loans,so as to make up for the lack of capital and reduce concern of capital inadequacy in the future,and thus expand the loan issuance.Banks delaying in confirming the provision for impairment of the loan,the non-sufficient capital and the non-sufficient provision for impairment of loans simultaneously exist.It increases the risk that the bank can't make up for the loss of future loans,so the bank will reduce the issuance of future loans.In addition,banks' capital and provision for impairment of bank loans are complementary.Banks can improve capital reserves to reduce the impact of provision for impairment of bank loans,both of which have the same role in the issuance of bank loans.This paper first analyzes theoretical basis,provision methods,institutional background and the existing problems of loan impairment provision in China,and then introduces the research hypothesis and research design of this paper.This paper presents three hypotheses,and uses the multiple linear regression model and the independent sample t test to verify the hypothesis.The empirical results of this paper are analyzed and the relevant suggestions are put forward based on the empirical results.According to the results of the study,banks should prepare adequate and timely provision for impairment of loans and do the capital reserve reverse cycle.From the regulatory level,the authorities should keep a close watch of economic fluctuations and do a forward-looking policy requirements.Besides,the authorities should implement differentiated supervision of different banks.The main innovation of this paper is to find the way to measure the advance and delay of loan impairment provision recognition and analyze the possible results based on the introduction of the expected loss model.At the same time,it proves that there is a complementarity between the bank capital and the loan loss provision.It is useful to improve the banks regulation and eliminate the cyclicality of the loan.The lack of the article is that the listed banks in the model are too less.