The Effect Of Capital On Bank Risk-taking And Lending Behavior

New capital regulation requires higher amount and quality of bank capital than before.Economic structure adjustment goes to the critical period.Inclusive Finance takes to the stage.This dissertation studies the effect of capital on bank risk-taking and lending behavior.This thesis researches the relationship between capital and bank risk-taking behavior from direct and indirect aspects.For direct aspect,this paper also deeply analyzes the important role of bank monitoring effort and compares the different effects of capital on bank risk-taking during different regulatory periods.As for the relationship between capital and bank lending behavior.On the one hand,this paper analyses the effect of capital on loan amount,loan structure and typical industry loan during different periods.On the other hand,this dissertation researches the effect of capital on Inclusive Finance loan from the perspective of Inclusive Finance loan has lower risk weightings in risk-based capital ratio.First,the direct effect of capital on bank risk-taking behavior.This study finds that bank capital has the inverted U-shaped relationship with monitoring effort and has the U-shaped relationship with risk-taking.Bank monitoring effort plays the mediation role in the relationship between capital and bank risk-taking.The relationship intensity increases during the period of new capital regulation.Banks should hold moderate capital levels to make their risk-taking to be smallest and also need to improve their monitoring effort.Second,the indirect effect of capital on bank risk-taking behavior.This dissertation use nonparametric estimation in regression discontinuity framework to study the indirect relationship between capital and bank risk-taking.This paper finds that risk-based capital ratio regulation can reduce banks’ risk-taking significantly.The core capital adequacy ratio regulation is more effective than capital adequacy regulation in restraining bank risk-taking behavior.The strength of risk-weighted capital ratio regulation reducing banks’ risk-taking decreases,while the leverage ratio regulation restraining bank risk behavior becomes stronger under new capital regulatory framework.Leverage ratio regulation plays a good complementary role.Therefore,this paper suggests that regulator should continue to strengthen the bank capital regulation and prevent banks from taking excessive risk.Third,the relationship between capital and lending behavior.This thesis find:(1)capital adequacy ratio inhibits bank loans,while core capital adequacy ratio has the positive effect on bank lending.Both the effect is enhanced during the financial crisis,but is weakened during the new capital regulation expected period.Leverage ratio really increases the caution of bank lending during new capital regulatory expected period.(2)For loans structure,personal loans’ growth rate is more sensitive to the capital than the corporate loans’.Leverage ratio can support the banks issue corporate loans effectively during the financial crisis.(3)For industry loans,if banks have high core capital adequacy ratio,their real estate loans’ growth is lower but manufacturing loans’ growth is higher,and this preference reduces during the financial crisis and new capital regulation expected period.Finally,the relationship between capital and bank Inclusive Finance lending behavior.For small and micro-sized enterprise loan,this paper finds:(1)the policy that small and micro-sized enterprise loans with lower risk weighting promotes small and micro-sized enterprise loans significantly,especially for small banks.(2)Banks with higher capital prefers lending to small and micro-sized enterprise after the policy implementing and this preference is remarkable among the big banks.For personal loan,this paper finds:(1)the policy that personal loans with lower risk weighting promotes personal loans significantly,especially for big banks;(2)Banks with higher capital prefers lending to personal after the policy implementing and this preference is also remarkable among the big banks.This dissertation demonstrates the role of capital in constraining banks from taking excessive risk-taking and optimizing banks’ lending behavior from a multi-dimensional perspective.This dissertation also provides strong empirical support for the new capital regulatory reform that promotes financial system stability and economic structural adjustment.