Research Of Capital Adequacy Ratio Regulation And Risk-Taking In Bank Sector Of China

The Basel Ⅲ Capital Accord put forward higher criterion for capital adequacy ratio ofbanking, How would commercial banks of China do for so stricter regulation pressure,How would banks adjust their level of capital and level of risk, and whether banks’level of capital and level of risk would interacted with each other? At the time ofeconomy recovery after financial crisis, we research this subject would be good forregulatory authorities to make decisions, it has theoretical and practical significance tomaintain healthy and stable development of banking industry.This paper first summarized literatures of the relationship between capital adequacyratio regulation and risk-taking of commercial banks, we found until now there is noconsensus on this issue at home and abroad. Then we build a theoretical model toanalyze the effect of capital adequacy ratio regulation on risk-taking of commercialbanks, In this part, we focus on the credit risk which is the most important risk ofbanks facing in the daily operations. We found that higher capital adequacyrequirements reduce banks’ credit risk appetite, thus reduce risk-taking level of banks,which fits well with the original intention of the regulatory authorities. On the basis oftheoretical analysis, we made empirical research on how financial crisis and banks’nature would affect the relationship between capital adequacy ratio regulation andrisk-taking of commercial banks. Empirical results show that financial crisis enhancesthe effect of capital adequacy ratio regulation and raises the risk-taking level of banks.Besides, the difference of banks’ nature make different results. At last, conclusionsand recommendations were made.