The Research On The Commercial Bank’s Pro-cyclicality In China

After the financial crisis in 2008, financial regulation and financial behavior patterns once again attracted the attention of scholars and they proposed that the micro-prudential supervision should be changed into the macro-prudential regulation in order to prevent the outbreak of systemic risk and to achieve long-term financial stability. Most scholars believed that the macro-prudential regulation should focus on solving the following two problems, one was cross-sectoral issues and the other was a matter of time. A matter of time mainly focused on research about the economic cycle characterized by the existence of financial institutions and as the most important financial institution, the financial institutions pro-cyclicality referred to the commercial banks pro-cyclicality. Without a doubt, one of the main causes of the large-scale financial crisis lied in the pro-cyclicality. At the same time, the characteristics of "Basel agreement" such as the capital constraint supervision mechanism and the financial accelerator made the financial system pro-cyclicality problem still exist. Since the banking market behavior caused the commercial banks pro-cyclicality and banking supervisory authorities actively promoted the process of the new requirements of the Basel Capital Accord, China’s commercial banks pro-cyclicality was gradually prominent. How to release the banking pro-cyclicality and prevent the financial crisis caused by pro-cyclicality has became the hot focus, so china’s commercial banks pro-cyclicality in-depth study would have important practical significance.Firstly, defining the commercial banks pro-cyclicality which is on the basis of relevant literature at home and abroad and analyzing the theoretical basis of the relevant commercial bank pro-cyclicality. Then based on the international research and experience, having a comprehensive and systematic study about the formation mechanism of the commercial banks pro-cyclicality from the internal and external factors and we have a conclusion that commercial banks pro-cyclicality generate mainly from the bank’s external supervision and it is difficult to eliminate the internal factors. Through the analysis of international commercial banks pro-cyclicality formation, we will have a good reference on the banking pro-cyclicality.Secondly, having an analysis on the current situation of China’s commercial banks that is the internal and external factors accelerate the emergence of commercial banks pro-cyclicality and on the behavior of the various stages of performance of banking credit, we make a conclusion that China’s commercial banks pro-cyclicality is emerging and has an effect on the macro-economy. So having an empirical analysis on the external regulatory factor (capital regulation and loan loss provision), we have a conclusion china’s commercial banks’capital regulation and loan loss reserve does exist pro-cyclicality.Thirdly, based on the above analysis, we give some suggestions which are from bank itself and regulatory perspective on the commercial banks pro-cyclicality. About the banks’ own terms, we give the following suggestions:to improve the reform of the pay mechanism, to accelerate our forward-looking dynamic provisioning system and to establish a sound implementation of fair value accounting. About the regulatory, we give the following suggestions:to improve counter-cyclical regulatory framework, to strengthen the coordination of counter-cyclical regulatory, monetary policies and fiscal policies, to strengthen and improve the transmission mechanism of monetary policy of non-credit and to weaken the banks’ pro-cyclicality.