The Basel Ⅲ And The Macro-Prudential Supervision&Regulation Of China Banking

Since the break-down of the Bretton Woods system in the1970s, the global financial system has gone through the US stock market collapse in1987, the Mexico’s financial crisis in1994, the Asian financial crisis in1997and the global financial crisis caused by the Subprime mortgage crisis in the US. The frequent eruption of financial crisis has brought serious damage to the global economy, causing great attention of the governments and regulatory authorities from all over the world. They’ve taken intervention measures based on Keynes’s economic theory, trying to restore the influences and prevent the collapse of the financial system, thus restoring global economic growth. It also arises thoughts about the causes of crisis, the mode of to economic growth, regulatory measures against those "too big to fail" kind of financial institutions, and the supervisory system, mechanism, standards and cross-border coordination, etc.In the field of financial regulation, the US, UK, EU and other countries (regions) have introduced their own financial reform program, the Financial Stability Board, the Basel Committee and other international organizations have developed or amended a series of reforms proposals to strengthen the cooperation among regulatory authorities, emphasizing on capital and liquidity regulation, systemic risk measurement, identification and elimination and risk mitigation, especially on the refinement of regulatory measures towards systemically-important financial institutions, and proposing reform framework of macro-prudential regulation to reduce the loss of macro-economy, thus maintaining the stability of the world financial system.Currently, the international financial reform jointly promoted by the G20sets out stricter new standards in regulation over capital and liquidity, also proposing more demanding requirements in such aspects as systematically-important bank regulation, counter-cyclical regulation, and cross-border regulation. As to the new issues and measures of the American and European countries in financial regulation and supervision, we need to do intensive researches, sum up experiences and come up with reform proposals that suit for the current condition of our country; As for Basel III and the regulatory systems, ideas and methods coming up, we need a active multi-level and substantive participation in the field of international financial regulatory reform, improving our discourse right and promoting international financial stability. Based on this, this paper takes Basel III and macro-prudential regulatory framework as the main line, drawing on the results of the international financial regulatory reform, conducting researches over the supervision of banking institutions and the design of macro-prudential regulatory framework.This paper takes a method of combining theories and practices, comparative analysis and empirical analysis, introducing the achievements of the international financial reform especially after the global financial crisis, including Basel III as well as the practices of implementing it and effective regulatory measures in China, focusing on exploring the establishment of China’s macro-financial prudential regulatory framework. This paper closely combines the reality of China’s banking and regulatory reform, exploring the effects of implementing and improving the prudential regulatory policy instruments such as counter-cyclical capital buffer and dynamic differential reserve ratio and proposes coping strategies in enhancing the coordination of financial regulatory institutions.This paper is divided into seven chapters. The first chapter is the introduction, introducing the background and significance of this topic as well as domestic and foreign studies, illustrating the basic idea and structure of this paper.The second chapter introduces the Basel III and the influence of Basel III indexes on banking. Based on the evolution process of banking supervision, by illustrating the contents of Basel Capital Accord, Basel II and III, elaborates the innovation of the supervisory philosophy, measures and tools, emphasizing on the influence of capital adequacy ratio, leverage ratio, liquidity and other regulation indexes on banking. And then, analysis the quantitative measurement methods of Basel III.The third chapter discusses the practices of implementing Basel III over the world. Firstly introduce the proposals of other countries, especially comparative analysis the difference of the timetable and roadmap between these countries, report the appraisal results of the implementation of Basel III. And then this chapter detail the practices of Basel III in China. It takes the implementation of capital regulation as the main line, demonstrating the evolution of China’s banking regulation, especially capital regulation regime, and effective regulatory measures, conducting a research on the new tool box combination including capital, dynamic provisioning, leverage ratio and liquidity ratio launched by the China Banking Regulatory Commission and finally making some recommendations.The fourth chapter analyzes the macro-prudential regulation and its practices. This chapter summarizes the concept and meaning of macro-prudential supervision, systematically sorting out the key elements of macro-prudential regulation, focusing on the regulatory content and evaluation methods over global and domestic systemically important financial institutions and compares the financial reform framework of the United States, Britain, and European Union. Referring to the useful experience of international banking Prudential policyframework, this part analyzes on some elements of practice of China’s macro prudential supervisionare, and puts forward suggestions focusing on the construction of existing banking supervision system, the improvement of supervision coordination mechanism, and the supervision on systemically important banks.The fifth chapter analyzes the macro-prudential policy tools in China based on Basel III, mainly conducting an empirical research on the tool of counter-cyclical capital buffer. Firstly, based on the recommendation of Basel III, this paper estimates countercyclical capital by calculating the generalized credit to GDP ratio and further analyzes the relationship between counter-cyclical capital and systemic risk, finding out that the countercyclical capital buffer estimated by using the generalized credit/GDP ratio matches the sample period of the economic cycle and government macro-control policy point, which can be used to identify the credit and systemic risk condition. It’s quite meaningful in identifying and preventing systemic financial risks as well as stabilizing the pro-cyclicality of banks granting excessive credit during economic boom and the lack of capital during economic downturn.Chapter VI analyzes the instrument of macro-prudential supervisory policies based on Basel III, mainly adopting the method of nonlinear threshold vector auto-regression model to analyze the effect of the dynamic differential reserve ratio from the perspective of macro-prudential policies. The empirical results show that reserve ratio can be used as macro-prudential supervisory tools under certain conditions:(1) Under the circumstance of high excess reserve ratio, it is effective to control credit growth by raising reserve ratio and when the excess reserve ratio is low, the effect is relatively poor.(2) During a period of tightened credit volume, adjustment of the statutory reserve ratio could easily affect credit growth while the opposite is true during periods of excessive credit granting.(3) The reserve ratio functions better in restraining credit expansion and controlling the impact of capital flows. In general, the role of the reserve ratio declines since the year of2012. Chapter VII explores the construction and prospects, including the mail research conclutions and the direction of future researches.