Our Country Commercial Bank Capital Adequacy Ratio Of Pro-cyclical Research

Capital regulation is the core of international commercial banking supervision. According to Basel Ⅱ regulatory requirements, commercial banks must retain a certain degree of regulatory capital to meet its capital adequacy ratio requirements. Regulatory capital requirements will affect the commercial bank credit and portfolio behavior, and evermore it will have an impact on economic fluctuations. During an economic downturn time, credit default risk will be increased; the quality of commercial banks will be declined; accordingly the provision of regulatory capital will be increased. During an economic boom time, commercial banks’ credit quality will be improved; and asset quality will be improved too. Thus provisional regulatory capital will be reduced. Therefore, it can be seen, regulatory capital shows pro-cyclical regulatory capital effect. In recent years, the pro-cyclicality of capital regulation has been widely studied attention.Capital adequacy ratio is an important indicator of measuring regulatory capital. This paper studies the capital adequacy ratio of commercial banks to examine the pro-cyclical effects of capital regulation, and through the empirical research to examine the commercial banks in China whether the pro-cyclical regulatory capital issues exists. In structure, this part is divided into theoretical analysis part and empirical research part. In the theoretical analysis, through referring the foreign models on the capital adequacy ratio of commercial banks, we derive to analyze the pro-cyclical capital adequacy ratio causes in China. In the empirical analysis section, we choose the11listed commercial banks in1998-2010as a sample, building panel data model, to valid the existence of pro-cyclical of our capital adequacy ratio of commercial banks, In this paper, we can obtain the following conclusions:On the whole, commercial bank’s capital adequacy ratio not only is pro-cyclical fluctuations in the domestic economy, and also showed pro-cyclical fluctuations with the world economy. The pro-cyclical capital adequacy ratio is related with assets size. At the same time, the commercial bank’s capital adequacy ratio of the pro-cyclical is asymmetry. In addition, this study also draws that:Compared with the small banks, the large banks have a clear competitive edge. The interaction affection between the capital adequacy ratio and economic fluctuations is through the supply of credit to transfer.We will provide a number of policy recommendations in this paper: improving the decision-making process of excess capital holdings, considering the whole cycle of credit rating methods, improving the provision way of the loan loss, enhancing the risk sensitivity of regulatory capital, Distinguishing regulatory policies of the different size banks, using a cluster of risk curves for commercial banks’regulatory capital, re-building the capital adequacy ratio formula, establishing a framework of macro-prudential supervision, reduce the effect of the transfer impact between capital adequacy ratio pro-cyclical and monetary policy.