Research On The Influence Of LPR Mechanism Reform On Commercial Banks’ Risk-taking Level

With the continuous advancement of interest rate marketization reform,our country’s interest rate marketization has been carried out to the key step.Since the introduction of the LPR quotation mechanism in China in 2013,people’s concern about LPR has been raised,but the effectiveness of this reform is not very satisfactory.2019 Central Bank issued Announcement No.15,which will make significant adjustments to the LPR quotation formation mechanism to promote the efficient operation of the interest rate market and effectively ease the financing burden of real enterprises.Compared with the LPR loan prime rate introduced in 2013,the LPR loan market quotation interest rate mechanism reform in 2019 is deeper and stronger,and more complete.Therefore,it is crucial to explore in depth the impact of the LPR quotation mechanism reform on the development of China’s real economy,especially its impact on commercial banks,which will provide us with valuable theoretical guidance and practical references.Under the above background,this paper reviews domestic and foreign literature related to LPR pricing mechanism and bank risk taking,and summarizes different views on the impact of LPR reform on risk taking.First,based on theoretical analysis and literature review,the relationship between LPR reform and commercial banks’ risk-taking and the channels of influence are analyzed,in addition,the heterogeneity of LPR reform on commercial banks’ risk-taking is discussed.Secondly,the impact of LPR reform is analyzed and the current problems of the reform are pointed out in order to make the research content of this paper have realistic explanatory power.Finally,we select the panel data of 231 commercial banks from 2013-2021 as the sample data,process the data using the propensity score matching method(PSM)to reduce the sample selection bias,and then use the double difference(DID)method to build a regression model to empirically test the impact of LPR reform on the risk-taking level of commercial banks.Based on theoretical analysis and empirical tests,the following conclusions are drawn:(1)LPR mechanism reform significantly enhances the risk-taking level of commercial banks in China.(2)LPR mechanism reform significantly enhances the risk-taking level of urban commercial banks,i.e.,compared to joint-stock commercial banks and rural commercial banks,urban commercial banks are most affected by LPR mechanism reform.(3)LPR mechanism reform can improve the risk-taking level of commercial banks through three channels: competition,credit and profitability.In view of the research and conclusion of this paper,in the context of the continuous promotion of LPR mechanism reform,corresponding countermeasures and suggestions are given for how commercial banks can realize their own development and control their own risks,and corresponding policy suggestions are given for how government regulators can further promote LPR reform and promote the process of interest rate marketization.