The Impact Of Statutory Deposit Reserve Rate On Commercial Bank 's Value

Since the1990s, Deposit Reserve Policy has shown a weakening trend in the world. Many countries, which primitively adopted the policy, have reduced required deposit reserve ratio dramatically or even cancel it, such as the United Kingdom, the United States, Switzerland, Australia, Canada, and so on. However, unlike the global trend, required deposit ratio, as one of the three monetary policy tools of the central bank, is favored by the monetary policy authorities in our country and becomes the monetary policy tool that our central bank employs frequently. Especially, our macro-economy has entered a new rapid development stage since2003. The economy keeps a stable and rapid development state. Trade surplus is expanding continuously. The RMB faces increasing pressure to appreciate. A large amount of international hot money swarms into our country. Thus, continuous surplus happens in both current account and capital account. Chinese economy develops so rapidly that its economic growth rate once reached as high as13%. With a large amount of foreign exchange reserve, massive fixed asset investment and increasing asset price, the economy is liable to get overheated gradually. Under this circumstance, the central bank began to adjust required deposit reserve ratio frequently after July2006in order to hedge liquidity in the market, stable commodity price and restrain overheated investment. The central bank adjusted required deposit reserve ratio for38times between2006and2012, which phenomenon is rare in the worldwide. Adjustment took place for10times both in2007and2008,6times in2010and7times in2011. The required deposit reserve ratio reached historically high level in June20th2011,21.5%for large financial institutions and18%for middle-size and small-size financial institutions, respectively. Although required deposit reserve ratio experienced decline for2times, large financial institutions still implement the20%criterion to render required deposit reserve to the central bank.Required deposit reserve ratio is regarded as a strong medicine for its huge impact on macro-economy. Therefore, academia thinks that monetary authorities are not supposed to take it as a frequently-used monetary policy tool. Against this background that our central bank frequently employs required deposit reserve ratio to adjust macro-economy, it is nothing else but commercial banks that are affected so hugely and so directly. For one thing, the adjustment of required deposit reserve ratio can directly affect how much absorbed deposit money can be used as loans; for another, the adjustment can influence the price of funds supplied in the financial market and then indirectly impact commercial banks’operating costs. Both aspects can inevitably affect commercial banks’operation and value. This article exactly based on the background that the required deposit reserve ratio is frequently adjusted by the central bank, systematically researches the influence of the adjustment of required deposit reserve ratio on commercial banks’value and examine in detail whether required deposit reserve ratio’s adjustment has influence on commercial bank’s operation and the extent of the influence. Since financial institutions carry out different required deposit reserve ratio according to their scales from April25th2004, this article chooses5joint-equity commercial banks and2state-owned commercial banks from16listed commercial banks and uses Panel Data Model to study the influence of required deposit reserve ratio on the value of joint-equity commercial banks and state-owned commercial banks between2006and2013.The outcome of this article’s empirical analysis shows that required deposit reserve ratio’s adjustment has positive influence on commercial banks’value in the current period, but significant inhibitory effect emerges in one-lagged period. At the same time, state-owned commercial bank’s value is more sensitive to the adjustment of required deposit reserve ratio and receives bigger and more significant influence. Compared with quantitative monetary policy instrument, price based monetary policy instrument has greater effect on commercial bank’s value. Considering the reality of our economy and finance’s development, deposit reserve policy will still has an important role to play in certain time. At last, this article, from the perspective of the central bank as policymakers and commercial banks as passive recipients, puts relevant policy suggestions to comprehensively promote the effectiveness of monetary policies for the central bank and, under the circumstance that the central bank frequently adjust required deposit reserve ratio, to effectively increase their value for commercial banks.