Study On The Impact Of Capital Adequacy Regulation On The Performance Of Commercial Bank In China

In some sense, the development history of bank’s regulation of capital adequacy ratio is thegame between commercial bank’s stability and performance. Since the Basel Accord Ⅲ comesout on December2010, all nation’s banking supervisory authorities have committed to theformulation of the new capital regulation rules, as a signatory of the Basel Committee, China isno exception. For the long term, comply with the Basel Ⅲ is benefit for our nation’s banksparticipating in the international competition. However, it’s still uncertain that the provision ofcapital adequacy ratio in the Basel Ⅲ is appropriate for the specific implementation of China’sbanking industry, and how this provision will affect bank performance. Moreover, in our nation’scapital adequacy regulatory practice, the regulatory authorities tend to pay emphasis onpreventing the risk, reducing non-performing assets in order to prevent systemic risk, instead ofsetting the improvement of performance as a important goal. Therefore, make a research on thecapital adequacy ratio ‘s impact of bank performance not only the top priority of China’s bankingindustry, but also the key to determining the future competitive power of China’s banking.This paper makes a study about the relationship between capital adequacy rate and theperformance of commercial banks from the Basel III perspective, aim to optimize themanagement of China’s capital adequacy ratio. Firstly, analyzes the challenges faced by China’scapital adequacy ratio management under the Basel III, and points out that further improve andoptimize the management of the capital adequacy ratio is eager to solved. The stability andperformance are often be considered separately in the past,but by now we should aware that thecapital adequacy ratio management can not only ensure stability but also enhance performance, sowe have to clear the relationship between China’s capital adequacy ratio and bank performance inthe first. This paper describe it on theoretical and empirical view, the result shows that the highcapital adequacy ratio reduces the banks’ profits. Obviously, the improve of China’s commercialbanks’ capital adequacy ratio is based on the cost of bank profits. Then the paper use nonlinearregression method to calculate the capital adequacy ratio which maximize bank’s performance,and find out the suitable capital adequacy ratio is different from the8%level in the provisionFinally, the paper proposed capital adequacy management measures based on Basel III.In this paper, although the current8%of the standard requirements of China’s commercialbanks regulatory capital adequacy ratio will decline in the performance of banks, but in the longterm, the capital adequacy standard will motivate banks to improve risk management capabilities,promote the transformation of profit model, and increases in bank performance. Today is theimplementation period of Basel III, China’s banking industry should take advantage of theopportunity for change, under the premise of not reduce or even improve performance, throughadjusting the structure of assets and liabilities, especially the adjustment of the static structure ofowner’s equity and incremental structure, using the new regulatory ideas and models, build newbanking system with advanced operation and management. Only in this way, the capital adequacyregulation can play the role of bank performance improvement.