An Empirical Study On The Impact Of Capital Regulation To The Credit Term Structure In Commercial Banks

A country’s economic lifeline is related to the safety and stability of banking. In our country, we actively followed the regulatory philosophy proposed by Basel Committee to gradually improve our regulatory framework these years. After 2007, China’s capital regulation has entered a new phase, capital supervision significantly enhanced, and commercial banks’ capital adequacy ratio markedly improved and can basically meet the minimum regulatory requirement of 8%.However, massive examples showed that capital regulation makes commercial banks shrink lending, which results in a number of economic recessions. In macroeconomics, different duration of loan has different impacts on economy, and most of the previous literature researched on the impact of capital regulation to the sum of credit, but pay little attention to the changes in the term structure of credit. Therefore, as commercial banks have reached 8% minimum regulatory capital requirements of the new stage, it is meaningful to study the degree of influence to different terms of loan while banks are faced with regulatory of capital adequacy ratio.Based on theoretical analysis and statistical observation, this paper use 11 Chinese banks’ semi-annual data during the period of 2007-2014 as research samples, establish panel data linear regression models and use Stata11.0 to test it. Including:(a) This paper uses loan volume, the amount of short-term loans and long-term loans, and the ratio of long-term loans to total loans of commercial banks as explanatory variables respectively.(b)While study the above explanatory variables, we use two proxy variables of capital regulation to simulate comprehensively. One is actual capital adequacy ratio, and the other is the regulatory pressure of commercial banks at three different levels of capital adequacy ratio.(c)Classify the sample banks according to the principle whether they are domestic systemically important banks in our country. The empirical results show that in order to improve capital adequacy ratio banks would reduce loans, including both long-term loans and short-term loans, and the ratio of long-term loans would also drop. But the decline in long-term loans is higher than the decrease of short-term loans, which reflects that the sharp decline in loan relies more on the long-term loans. Finally, this paper proposed targeted and practical policy recommendations from the position of commercial banks and regulatory authorities.