The Research On The Impact Of Regulatory Penalties On Bank Risk-Taking

As the core of China’s financial industry and the main financing body of enterprises,commercial banks directly influence the direction and quality of China’s future economic development.In 2020,the closing year of the three tough battles,China’s financial system has made substantial progress in preventing and resolving financial risks,achieving effective prevention of incremental risks and gradual resolution of stock risks.However,the financial security situation facing China during the 14 th Five-Year Plan period and for a long period in the future is still very complex and serious.At the same time,with the continuous promotion of the reform of the national financial system,the internal and external environment faced by commercial banks is gradually becoming more complex under the impact of interest rate marketization and Internet finance.This has caused the overall profitability level to be continuously squeezed,leading to frequent local risk events of commercial banks.A large number of enterprises and banks are involved and associated behind these violations,which increases the difficulty of risk supervision by the supervisory authorities and increases the degree of risk contagion in the banking system.And regulatory penalties,as an important tool and instrument of micro-prudential supervision,have played an important role in maintaining the safety and stability of the financial sector.It is natural to ask whether the regulatory penalties that have been implemented in China for nearly two decades have played their proper role.Based on this,this paper manually collects administrative penalty data of each commercial bank from 2007-2020 from the official website of CBRC.First,the specific effects of regulatory penalties on banks’ risk-taking and the possible intermediate mechanism paths are analyzed at the theoretical level.Second,the impact of examining the penalties imposed by regulatory authorities on bank risk-taking is empirically tested using Chinese banking industry data.It is found that regulatory penalties significantly inhibit banks’ risk-taking,a finding that still holds after extensive endogeneity and robustness tests.Further analysis of the effectiveness of regulatory penalties from both time and space perspectives reveals that regulatory penalties not only have a long-term effect on risk inhibition,but also serve as a warning effect of "making an example of banks".Second,the mediating effect model shows that media attention,deposit growth rate and leverage level are three potential paths for regulatory penalties to reduce banks’ risk-taking.Finally,in terms of heterogeneity,asset size and the nature of equity weaken the risk-suppressive effect of regulatory penalties.The findings of this paper provide a rich and useful policy reference for regulatory authorities on how to better improve micro-prudential supervision.