Research On The Bank Risk-taking Channel Of Monetary Policy

During the financial crisis (2007-2009), many financial institutions suffered serious losses, financial institutions excessive risk behaviors are generally considered to be an important reason for the outbreak of the crisis. After the outbreak of the crisis, bank risk-taking channel, a new theory of monetary policy transmission mechanism, has been proposed the U.S. long-term low interest rates since2002caused the commercial bank lending to relax, excessive accumulation of risk of the banking system and eventually lead to crisis. Although the theory is fresh, but it has been verified by foreign scholars using data in a number of countries in Europe and America.Taking our typical characteristics of monetary policy and bank system into account, this article treats the relationship between commercial bank risk-taking and monetary policy as the object. Based on the analysis of risk identification and measurement methods, we link the monetary policy and bank risk-taking behavior. Commercial banks’ risk-taking behavior will influenced by the monetary policy through different channels, based on the risk-taking channel theory, loose monetary policy, on the one hand, promotes asset prices, rises the value of collateral, increases cash flow, thus decreasing corporate financial costs and reducing the banks’ risk identification and measurement. On the other hand, it reduces the investment is risk-free securities, especially the rate of return in the income searching motivation and competitive effects, driven by reducing the banks and other financial institutions’ risk aversion, thus raising the banks’ exposures. Based on this, we have compared the difference between risk-taking channel and traditional credit channels of transmission mechanism.By the use of the panel data, between2002and2012, of China’s34commercial banks, we have, in this paper, studied the problem of bank’s risk-taking instigated by monetary policies. The results of our study indicate that China’s monetary policies impinge on bank’s risk-taking, and the capital adequacy ratio plays an import role in it. To avoid the excessive accumulation of risk, policy authorities should consider bank capital adequacy position and the macroeconomic environment, accelerate pace of the market interest rates, weaken domestic bank credit expansion drive and increase the effectiveness of policy adjustment in order to achieve financial stability.