China's Monetary Policy And Commercial Bank Risk-taking

Since China entered the new normal,financial innovation has emerged in an endless stream.The use of monetary policy tools is also being innovated.The transmission mechanis m of monetary policy has always been a hot topic for many scholars in studying macroeconomics.The Asian financial crisis in 1997 and the global financial crisis in 2008 made people aware of the importance of financial system risks.Summing up the lessons learned from the financ ia l crisis,it is widely believed that the fundamental reason lies in the long-term loose monetary policy.The loose monetary policy leads to the long-term low interest rate,while the low interest rate makes the financial institution's loan increase to produce an asset price bubble,eventua lly leading to the financial institution's commitment.Excessive risks are then transmitted to the entire financial system.Therefore,it has become a research hotspot for many scholars that how the monetary policy affects the risk of financial institutions,especially banks,and their wil ingness to take risks.And they have summarized various theories of bank risk-taking channels for monetary policy.Since 2013,the Central Bank has innovated a number of new monetary policy tools,such as short-term liquidity adjustment instruments(SLOs),standing borrowing facilities(SLFs),and medium-term borrowing facilities(MLFs).But for these new monetary policy tools,their impact on the bank's risk-taking is not clear.Therefore,it is necessary to conduct in-depth research to explore the impact of different monetary policy instruments on bank risk-taking.According to traditional monetary policy transmission theory,monetary policy is generally through the interest rate channels and credit channels to influence the risk-free interest rate or the bank's balance sheet and thus affect the investment and financing costs,and ultimately affect the bank's wil ingness to supply credit and supply capacity.However,the bank's risk-taking channel theory that put forward by the academic community's new monetary policy is affected by the bank's risk appetite,risk identification,and measurement.The specific route channels can be divided into the following five types: income valuation effect channels,profit-drive n motivation effect channels,competition effect channels,habit formation effect channels,and insurance effect channels.Based on the bank's risk-taking channel for monetary policy,this paper selects the micro data of 40 commercial banks from 2008 to 2017,including 5 large state-owned banks,8 nationa l joint-stock banks,and 27 city commercial banks.The fourth chapter uses the static panel model to empirically demonstrate the effects of quantitative and price-based monetary policy tools and structural monetary policy tools on commercial banks' risk-taking.This empirical study divides commercial banks into four categories: large state-owned banks,joint-stock banks,large and medium-sized listed banks and city commercial banks.Chapter 5 uses the PVAR model to empirically analyze the impact of three different monetary policy tools on the risk-taking of commercial banks.Among them,different monetary policy instruments include traditiona l price-based and quantitative monetary policy tools,and also the innovative structural monetary policy tools of the Central Bank since 2013.The above empirical evidence confirms the impact of monetary policy on commercial bank risk,validates the bank's risk-taking channel for monetary policy,and confirms the existence of profit-driven motivational channels and competitive channels.The study finds that: traditional price-based and quantitative monetary policy tools have a significant negative correlation with bank risk-taking agency variables;structural monetary policy tools and bank risk-taking variables present a significant positive correlation,differe nt monetary policies also have different degrees of influence on the risk-taking of banks of different sizes,while banks' own characteristics and the macroeconomic environment will also have a certain impact on the bank's risk.In an environment of loose monetary policy,asset prices rise and banks loosen credit standards.At the same time,banks' risk identification and measurement are reduced,and bank's risk-taking level will eventually rise.In order to avoid excessive accumulation of risk in the banking system,policy authorities should consider the micro-characteristics of the banking industry and the macroeconomic environment,explore new and innovative policy tools,establish and improve a macro-prudential supervision system,strengthen and improve the risk supervision of commercial banks while advancing the banking industry.Transformation and innovation will further improve the effectiveness of monetary policy adjustment and achieve financial stability.