The Impact Of Economic Policy Uncertainty On The Risk-taking Level Of Commercial Banks

Recent years,global negative events happened frequently,the Sino US trade friction,spread of COVID-19 and the outbreak of conflict between Russia and Ukraine have intensified the trend of anti-globalization,which not only has intensified political and economic conflicts among countries,but also brought greater pressure on the development of the world economy.To ease the downward pressure in the economy,some countries have issued a series of economic policies to stimulate economic growth,but which will also aggravate the uncertainty level of economic policies and increase systemic financial risks.The Central Economic Work Conference for 2021 proposed that "the current economic work should be stable and seek progress while maintaining stability",and proposed that "macro policies should be stable and effective",that is,macro policies should maintain stability,continuity and sustainability,indicating that China should not only alleviate the downward pressure on the economy,but also maintain a stable economic environment.However,facing a great change that has not happened in a century.,the international pattern and system are constantly changing,and the global economic and political situation is changing all the time,China’s economic policies will inevitably have to be adjusted.At the same time,with the close ties between countries,the fluctuations of other countries’ economic policies will also be transmitted to China,which intensifies the uncertainty of China’s economic policies.And when there is a high level of economic policy uncertainty,the market subject will face more risks because of the uncertainty of the future market environment,which will affect its decision-making and judgment ability.As the most important financial institutions in the financial system,commercial banks are important bridges between the financial market and the real economy,which are also highly guided by economic policies,so their risk-taking will also be affected by the frequent fluctuations of economic policies.Therefore,it is of constructive and realistic significance to explore this subject,it can be used as a reference for commercial banks to maintain a stable level of risk-taking and help government preventing financial risks and maintaining the stability of the financial system.At the same time,comparing the risk-taking level of different types of banks in China,the non-performing loan ratio of city commercial banks has increased all the way since 2016.By the end of 2021,the non-performing loan ratio of city commercial banks in China was 1.90%,0.53% higher than large commercial banks and joint stock commercial banks in China,and the non-performing loan ratio of state-owned banks and joint stock banks was relatively stable.Therefore,selecting state-owned banks with high asset scale and profitability and city commercial banks with regional operation for comparative analysis,study whether urban commercial banks can learn from state-owned banks in risk control,operation management and development strategy,and how to maintain a stable risk-taking level in the environment of economic policy uncertainty.This paper is divided into five chapters.The first chapter is the introduction.Firstly,it is the research background.It introduces the status quo of the rising level of uncertainty of China’s economic policy since the global financial crisis and the possible impact on the risk-taking of commercial banks,thus leading to the research significance of this paper.Then,the relevant domestic and foreign literature is sorted out to clarify the concepts and theoretical basis of economic policy uncertainty and risk-taking of commercial banks,and the impact of economic policy uncertainty on the risk-taking of commercial banks is reviewed.So determine the research ideas and methods of this paper;Finally,the possible innovations and limitations of this paper are elaborated.The second chapter is the theoretical analysis,this paper firstly introduced the current situation of China’s economic policy uncertainty and commercial bank risk-taking,and then the related theoretical analysis,the bank’s risktaking subdivides into proactive risk-taking and passive risk-taking.By analyzing the impact of economic policy uncertainty on two types of risk-taking of state-owned banks and city commercial banks,brings up the influencing mechanism and hypothesis.The third and forth chapter is the empirical analysis of this paper.This paper selects the quarterly data of state-owned banks and 17 city commercial banks from 2010 to 2021 as samples to measure the proactive risk-taking of banks by riskweighted asset ratio,and measure the passive risk-taking of banks by non-performing loan ratio.The index of China’s economic policy uncertainty compiled by Baker et al.(2016)was used as the proxy variable to construct the benchmark regression model.Furthermore,the mediating effect model is used to investigate the transmission channels of economic policy uncertainty on bank risk-taking from return on assets and deposit to loan ratio respectively.The last chapter is the research conclusions and suggestions of this paper.Based on the research conclusions of this paper,some reference suggestions are put forward for the two levels of government and commercial banks,and corresponding countermeasures are put forward according to the different conclusions of state-owned banks and city commercial banks.The empirical results show that :(1)the increase of economic policy uncertainty will reduce the proactive risk-taking of state-owned banks and increase the proactive risk-taking of city commercial banks.This indicates that in the face of the fluctuations of economic policies,state-owned banks will reduce their risk tolerance,while city commercial banks may increase their proactive commitment to improve their profit level.(2)The rise of economic policy uncertainty will simultaneously intensify the passive risk-taking of both types of banks.This shows that economic policy uncertainty will worsen the passive risk-taking level of banks by reducing the return on assets and risk identification ability of banks,and both types of banks will be affected by this negative effect.(3)Economic policy uncertainty will aggravate the passive risk-taking level of state-owned banks and city commercial banks by reducing the return on assets of banks.This conclusion is consistent with the above analysis and plays a supporting role in the conclusion that "economic policy uncertainty will worsen banks’ passive risk-taking".(4)Economic policy uncertainty will intensify the passive risk-taking level of city commercial banks through the mediating effect of deposit to loan ratio,but it does not have this effect on state-owned banks.This shows that in the face of uncertainty of economic policies,city commercial banks will expect to improve their own income level and thus increase the deposit to loan ratio.At a low level of risk identification,their passive risk-taking level will be intensified.Based on the empirical conclusions,this paper puts forward some suggestions from the government and commercial banks: for the government,it should keep the consistency and transparency of economic policies,and pay attention to the implementation process of local policies;As for the state-owned banks,they should assume more of their "bellwether" role,avoid excessive credit reduction,and correctly guide and intervene in the negative impact of economic policy uncertainty on the real economy.For city commercial banks,diversification should be improved,financial innovation should be actively promoted,income structure should be improved,improve the risk control system and maintain a stable level of risk taking.There are three possible innovations in this paper :(1)In this paper,state-owned banks and city commercial banks with large differences are selected for grouping analysis,subdividing the research scope and broadening the research ideas.(2)In this paper,the risk-taking of commercial banks is subdivided,to better analyze the proactive risk-taking and passive risk-taking level of banks in the face of economic policy uncertainty.(3)In this paper,the two groups of samples are tested through the mediation effect to find out the common mediation effect and the unique mediation effect of city commercial banks.Therefore,this paper explores the mechanism differences between state-owned banks and city commercial banks in the process of risk-taking affected by economic policy uncertainty.