Study On Behavior Of Commercial Banks Under The Dual Constraints Of Capital And Liquidity

With the outbreak of the financial crisis in 2008 exposing the lack of a single capital regulation of Basel I and Basel ?,scholars and pragmatists started to explore the effectiveness of banking regulatory policies on the behavior of commercial banks.As the Basel ? increased the capital constraint requirements and introduced new targets such as liquidity coverage and net stabilization financing ratio in 2010,the international banking industry has entered a new stage of dual constraints of capital and liquidity.In February 2014,the CBRC issued the"Regulations on Liquidity Risk Management of Commercial Banks(Trial)" and other regulatory rules.Since then,China's banking industry has entered a dual stage of capital and liquidity constraints.However,the introduction of a series of regulatory policies may have a greater impact on bank behavior.What happens to bank credit behavior under the dual constriants?What is the impact of the dual regulation of capital and liquidity on banks'risk?taking?These are important issues worthy of in-depth discussion.Based on the research of Kopecky and Hoose(2004a),this paper establishes the objective function of profit maximization of commercial banks and studies the credit behavior of commercial banks under the dual constraint of capital and liquidity by introducing the liquidity constraint and supervision punishment mechanism.Based on the sample data of 15 domestic listed banks from 2007 to 2015,this paper empirically analyzes the influence of dual constraints on bank credit growth and credit concentration.We find that capital regulation may have some restrictions on bank credit expansion.Capital constraints can improve loan concentration.The cross effect of dual constraints may enhance the credit squeeze effect of capital regulation.The influence of liquidity constraints on credit concentration is not obvious.On the basis of Shrieves and Dahl'study(1992),We modify the simultaneous equations model and construct the interactive model between the adjustment of capital level,liquidity and risk-taking.Using 36 commercial banks' panal data from 2007 to 2015 in China and the differential GMM estimation method to analyze the impact of capital and liquidity regulation on the banks'risk-taking,this paper finds that the improvement of the capital adequacy ratio and liquidity ratio will significantly reduce the bank's risk-taking behavior.Dual regulation does have a good binding effect.Based on these conclusions,this paper puts forward several policy recommendations which include enhancing the liquidity regulatory policy,taking the dual regulation of capital and liquidity into the policy assessment consideration,analysing the influence of double constraints on bank behavior from the perspective of interaction between banks'behavior.