Banks’ Capital Buffer, Risk And Performance In The Chinese Listed Banks: Impact Of Business Cycles And Regulatory Changes

The outbreak of the financial crisis in2008raised the awareness of the importanceof banking regulation, for which the Basel Committee issued "Basel Ⅲ", put forwardcounter-cyclical regulatory policy to deal with the inherent pro-cyclical and requiredbanks to reserve countercyclical capital buffer. Banks increase excess capital adequacyrequirement in the economic boom-dynamically adjusted capital adequacy ratio, toprepare for a recession to deal with the situation in the capital adequacy ratio to decline,which allows banks to upstream capital buffer in the economic cycle provision forabsorbing losses in the down cycle.In this financial crisis, China’s commercial banks have been under light impactrelatively, and the performance of China’s banking system is better than that in thewestern developed countries. Does China’s banking capital buffers vary from foreignbanks, and is there difference between cyclical capital buffer and foreign pro-cyclical?Is there relation between the risk and performance of the Bank in China and theeconomic cycle? In2004, China promulgated the "Commercial banks’ capital adequacyratio management approach" and began to conduct rigid regulatory on bank capital, andissued a series of regulatory measures on bank capital following the financial crisis.Isthere impact, which the implementation of capital regulation on bank capital buffers,risk, performance? Does the implementation of regulatory capital create desired results?This paper first describes the background and significance of research andinnovation, and on related research at home and abroad were summarized, and then sortof related theories system, and finally to China’s listed banks empirical research andmade suggestions. Using an unbalanced panel of16listed banks from year2000to2012and GMM dynamic panel estimation method, this paper verifies bank’s capital buffer,risk and performance in the Chinese banking system: impact of business cycles andregulatory changes. The results show that: the bank’s capital buffer shows a positiverelationship with the business cycles. Changes in capital regulation allow banks capitalbuffer showing a stronger counter-cyclical; Bank risk’ periodicity is not obvious，therisk of bank is greatly influenced by the supervision；The performance periodicity wasnot obvious in the Chinese banks, the capital regulatory changes had no significanteffect on performance. Capital buffer can significantly increase the bank’s performance,while it no significant effect on the bank’s risk.