The Reserch On Capital Adequacy Regulation And Risk

Evaluation and improve the existing supervision methods of banks has guidance meanings, how would the implementation of minimum capital requirements affect the risk behavior of commercial banks, thereby affecting the safety of the banking system, has already been in the debate of theoretical study as well as in regulation practice. Tradition theories argue that capital restrain is effective enhancing the safety of bank system and ability to resist the risk. Yet it was challenged by asset substitution effect:commercial banks that raised capital requirement shift their portfolio structure from low risk towards high risk in order to compensate for additional costs imposed by the more stringent capital standards. Under this circumstance, the risky behavior can not be restrained through raising capital. Furthermore, it is possible that a more highly capitalized bank has a higher probability of failure. A double moral hazard problem arises as the result of the conflict between shareholder and debt holder and the conflict between shareholder and manager, therefore the difference in risk-making entities causes the difference of risk-taking incentives and behaviors, and further affects the relationship between risk and capital. To abstract the information from the relationship between them exactly has important implications for academia and regulatory policies. It also relates the sound operating of the whole financial system. Based on these, this article establishes a theoretical model to discuss the different forms in risk-taking incentives under the three entities respectively when existing asset substitution effect, and then test it in different countries.The well-capitalized banks in financial crisis became poor-capitalized in short-term and finally bankrupted confirms that determine the safety through capital ratio singly needs further researching. Can widely used capital ratio recommended by Basle committee catch the asset substitution effect? Under that, whether the difference in risk decision entities actually affects risk behavior, and thereby causes the different relationship between risk and capital? This article researches these issues theoretically and empirically. This article demonstrates theatrically that under the surveillance of regulators and shareholder, bank has the incentives to take more risk when exiting asset substitution effect, which is a deep and supplement to early research; in the empirical study, we find asset substitution effect do exit in America, and exit to some degree in Japan China.This paper has five partsThe first part mainly introduces the backgrounds of the question and the significance of the research, the research method, and train of thought and the structure, and the innovation and shortfalls of this paper.In the second part, we show the relationship between capital and risk behavior and asset substitution effect, which can be as the base for the following text.In the third part, we establishes a theoretical model to discuss the different forms in risk-taking incentives under the three entities-regulator, shareholder and manager respectively when existing asset substitution effect, which is a base of the imperial study.In the fourth part, based on our theory, we test whether asset substitution effect exists in America, Japan and China. And point that the capital ratio has some shortcomings in catching that effect.In the fifth part, we give the conclusion and the policy advice according the conclusion.