Bank Capital Buffers, Economic Cycle And Macroeconomic Effects:Empirical Evidence From China’s Listed Banks

Since the US subprime crisis was burnt out, the international organizations and national regulatory authorities have been making efforts to promote the reform of the regulatory framework. The typical pro-cyclical features of the crisis make many countries begin to emphasize the importance of the counter-cyclical regulation. Basel Ⅲ proposed the specific regulatory measures of counter-cyclical capital buffer in 2010. However, the theorists have not reached a consensus about the relationship between capital buffers and the economic cycle at home and abroad.Based on theories and result of relevant literature, the paper investigates the relationship by using the dynamic panel model and the data of China’s 14 listed commercial banks from 2005 to2014. At the same time, the paper further analysis the economic effects of capital buffers, the results show that China’s commercial banks have a counter-cyclical capital buffer and it is more obvious during the period of economic recession. The state-owned banks is farsighted compared with the non-state banks. The banks with lower capital buffers is short-sighted. The relation between the change of capital buffers and lending growth is negtive.The capital buffer does not play an important role in mitigating the pro-cyclical of the credit, but it does inhibit the lending growth of banks with lower capital. According to the above empirical results, this paper proposes policy recommendations about the counter-cyclical capital regulation, hoping the regulatory authorities can put up more effective policies to promote the bank become more prudent, reduce the risk of their management, maintain the stability of our financial system and promote the better development of macroeconomy.