Impacts Of Loan Quality On Capital Adequacy Ratio Of The Rural Cooperative Financial Institutions

Capital adequacy ratio is the life-line for banks. Maintaining adequate capital is not only the basic for banks’ existing and developing, but also the important guard for financial security. Recent years, with the deepening of financial institute reform and internationalization of financial supervision, china banks are facing the extraordinary challenges coming from capital constraint. In such circumstances, how to make wise choice in direction, how to adjust actively, is the main issue facing with the banking industry in China.With the rapid development of regional economy and the continuous growth of small and medium-sized enterprises, Ningbo rural cooperative financial institutions has become the important part of Ningbo financial system. But as a result of historical reason, the capital adequacy ratio was on a low level for a long time. The rural cooperative financial institutions system reform process through the improvement of corporate governance structure and the expansion of capital, made the capital adequacy ratio reach the regulatory requirements in a short term. But because of the problems, such as the unreasonable capital structure, the unclear capital supplement mechanism, credit and risk management level is not advanced, can not be solved, the current capital adequacy ratio lacks stability and the ability on risk response. Once, the external environment changes, such as the rapid development of business made risk weighted assets increase and the deteriorating economic environment formed lots of bad debts, will cause the capital adequacy ratio decline rapidly.The paper makes the basic concept of capital adequacy ratio of commercial banks and capital management theory as the starting point. The paper chooses theoretical research and empirical analysis, understands the details of the domestic and foreign commercial bank capital management present situation on the base of a large number of information and data. Then take a research on Ningbo rural cooperative financial institutions, study thoroughly on the changes of loan quality in its effect on the capital adequacy ratio by loan quality pressure test. Therefore, the paper points out the problems and deficiencies of Ningbo rural cooperative financial institutions on credit management, capital and capital adequacy ratio management at present, Finally, combining with the results of the empirical analysis, the article provides some suggestion on strengthening Ningbo rural cooperative financial institutions capital management, improving the quality of assets and capital adequacy ratio.