The Study On The Reasonable Interval Of Leverage Ratio Of China’s Commercial Bank

The international financial crisis triggered by the U.S. subprime mortgage crisisbroke out in2008. Although the capital adequacy ratios of commercial banks inEuropean and American are high before the crisis, they still didn’t get rid of theimpact of the financial crisis. Thus the international community reflected theregulatory system currently, they point out that the capital adequacy ratio is difficultto control the systemic risk of banks. So Basel Ⅲ as the product of global bankingcapital regulatory reform was proposed. That raised the requirement of regulatorycapital. Leverage ratio as an important part of Basel Ⅲ was proposed, added theshortage of capital adequacy ratio. Its importance can not be ignored. Therefore, thestudy of bank leverage ratio in current and even in the future has important practicalsignificance.This paper reviews the development of the capital structure theory, and explainsthe application of capital structure theory in banking sector. Under the influence ofdeposit insurance and capital regulatory requirements, banks have the most optimalleverage range. Then we analysis the current situation of leverage ratio of majorbanks in domestic and foreign, and calculate a reasonable leverage ratio interval ofour commercial banks by learning from the Du houyang’s method. Base on the above,then this paper analysis the factors of leverage ratio by the use of qualitative andquantitative research methods. We think many factors affect the bank leverage ratio,such as macroeconomic factors, micro-lever factors and bank-specific factors. Thenwe select fourteen listed banks of our country as a research object, and analysis the14banks from2004to2010using panel data model. We find that economic cycle,profitability and regulatory capital requirements have a positive impact on leverageratio. The bank size and leverage ratio have a negative relationship. Whilenon-performing loans have no effect on leverage ratio. Finally we propose manysuggestions in order to achieve reasonable leverage ratio interval.