Research On Profitability Of China's Commercial Banks Based On Leverage Ratio Supervision

As the core of the financial system,commercial banks play a vital role in economic development.The occurrence of the international financial crisis has fully exposed the deficiencies in the supervision indicators of capital adequacy ratio that rely on the Internal Rating-Based Approach.Industry insiders have found that commercial banks have transferred a large number of risky assets in their balance sheets to off-balance-sheet leverage,and many off-balance-sheet leverage has emerged,which attracted the attention of regulators.The leverage ratio indicator came into view and became a new supervision indicator with the introduction of Base III agreement.On the other hand,according to the international supervision rules,China has formulated the leverage ratio supervision scheme catering for the development of commercial banks,and has continuously perfected it,which has improved the capital supervisory framework of commercial banks and contributed a healthier and more comprehensive supervisory] system in our country.In recent years,the leverage ratio of commercial banks in China has been rising and its profitability has declined.The strengthening of leverage ratio supervision would limit the expansion of commercial banks' assets and liabilities to some degree and affect the profits of commercial banks.Based on this background,combined with the domestic and foreign scholars' research on leverage ratio supervision and the profitability of commercial banks,this paper studies the impact of leverage ratio supervision on commercial banks' profitability through comparative research,historical analysis and empirical analysis.Starting from the leverage ratio supervision,this paper analyzes the relevant theories of leverage ratio supervision and profitability of commercial banks,focusing on the mechanism of the influence of the current leverage ratio supervision indicator on the profitability of commercial banks.Taking two developed countries of America and Canada as examples,this paper analyzes the practice of the leverage ratio supervision and profit status of commercial banks in both countries,and provides some experience for improving the benefit of commercial banks in China.On the basis of the analysis,this paper analyzes the institutional arrangement of leverage ratio supervision of commercial banks,the current situation of leverage ratio and profitability and the correlation between them,and draws a conclusion that leverage ratio supervision leadsto the decline of commercial banks' profitability.Through the empirical analysis of panel data,this paper makes an empirical study on the relationship between leverage ratio supervision and profitability of 16 listed commercial banks in China from 2008 to2017: in general,there is a significant negative relationship between the leverage ratio supervision index and the return on assets of commercial banks,which has a considerable negative effect on the return on equity;at the same time,the leverage ratio supervision indicator affects little the return on assets of large-scaled commercial banks,joint stock commercial banks and city commercial banks,but it has a significant negative effect on the return on equity of the three types of banks,and among them,the joint-stock commercial banks bear the largest impact.In order to improve the profit level of commercial banks in our country under strict supervision,this paper puts forward several suggestions based on the leverage ratio supervision: First,improve supervisory level and implement differential leverage ratio supervision;second,improve asset quality and optimize asset structure;third,improve capital replenishment ability and broaden capital replenishment channel;fourth,improve operation and management ability,and reasonably evaluate profit model.