A Study On The Effct Of The Deposit Resrve Ration On Bank Risk Taking

Since the reform and open policy, China has experienced a quick development of social economy and has properly managed the financial system. Although the economic growth has been slowing down a bit recently, due to the arrival of "the new normal" of economic development, the economic conditions are still reasonable and controllable, where micro-stimulation and "specific oriented policy instruments" can play an effective role. Since last year, the Chinese central bank also started to carry out the new macro-control to promote the new economic growth.The initial aim of bank reserve against deposit policy was not to manage the macro-economy. The US Federal Bank Act proclaimed the requirement of commercial banks to set up the reserve against deposit, and this requirement was aimed to prevent the default of repayment due to banks’ over lending. However, high bank reserve against deposit can also cause a negative effect on future economic development. Specifically, high bank reserve could aggravate the financial de-intermediary, twisting the allocation of resources. What’s more, the bank reserve rates set the baseline for market rates, obstructing the interest rate marketization in China. Instead of reducing bank reserve ratios on the whole, it’s more helpful to conduct the specific oriented reduce of bank reserve ratios according to practical experience, because the specific oriented reduce of reserve features a constructive adjustment of economy, which assists the key and weak fields of economy to acquire more support from bank credit, thus achieving the goal of steady growth and better structure in social economy. This paper analyzed the influence of bank reserve policy on commercial banks’ credit loans during the interest rates marketization, by using a regression model. And the result shows that the increase and decrease of bank reserve rates both will affect the commercial banks’ credit loans.Deposit reserve policy practice for more than 30 years in our country, although there is a lot in the process of thinking and improve, but the overall effect is satisfactory. In the future, in order to promote the reform of interest rate marketization in our country and the development of economic globalization, is likely to gradually reduce the use frequency but short-term deposit reserve policy, but in the short term, the deposit reserve policy is still the important tool of central Banks do not skim.Most general, when the central bank raises the legal deposit reserve rate, the money multiplier will become smaller, under the condition of invariable in the monetary base, money multiplier credit expansion function abate, money supply will decrease, due to reduced money supply also reduces the investment and consumption, the economy of the drop in output.In addition, this paper also gave a qualitative analysis on the bank reserve rates and the interest rates marketization, concluding that though it’s unnecessary for China to reduce bank reserve rates on the whole, it’s still necessary to cautiously use the bank reserve policy to make way for the interest rates marketization, in order to fit in the changes of global economic development and promote a better basic role of market in social economic development.