Effects Of Credit Channel Of Monetary Policy Under Counter-cyclical Financial Regulation

Financial crisis sweeping the globe in the 2008, The deficiencies in awareness of commercial banks systemic risk from banking supervision system was exposed under the Basel Ⅱ framework agreement. Under the background of the crisis, the Basel Committee on Banking Supervision has accelerated the pace of reform. They introduce a number of papers to emphasize the role of counter-cyclical macro-prudential and micro-prudential financial regulation. Also, they emphasize to enhance coordination of macro-prudential supervision and monetary policies. At the end of 2010, the formal introduction of the "Basel Ⅲ" marks the beginning of macroprudential supervision in commercial banks, Also it represents that the counter-cyclical financial regulation has entered a new stage. "Basel Ⅲ" sets the minimum requirements of capital adequacy, leverage ratio and liquidity ratio, and made arrangements for the transition period. So for Basel III, we selected financial counter-cyclical regulatory tools, for example capital adequacy ratio, liquidity ratio and leverage ratio. We want to make a counter-cyclical financial regulation research on transmission channels of credit of monetary policy.Firstly, we introduce the research background and significance. Also we elaborate some counter-cyclical financial regulatory tools, monetary concept of the monetary policy transmission mechanism, credit concept of the monetary policy transmission mechanism and other related theories,so that they can lay the theoretical foundation for the following study.Secondly, based on the balance sheet, we compare the analysis of counter-cyclical regulatory tools (capital adequacy ratio, liquidity ratio, leverage ratio) and the traditional deposit reserve ratio on bank credit.Thirdly, using panel data methods, we collect annual data of China’s macroeconomic and twelve commercial banks from 2004 to 2014. On the basis of the deposit reserve ratio, we join capital adequacy ratio, liquidity ratio and leverage ratio in the model orderly, to compare to the establishment of the four panel data models. We accord to the test results to determine the right model which should be established. The results showed that: first, the Countercyclical regulatory tools such as capital adequacy ratio, liquidity ratio have constraint effect of traditional monetary policy; Secondly changes in credit have no significant effect with the capital adequacy ratio in the current,but they have positive effect in the lag; Bank liquidity ratios have significantly negative impact on the changes in credit; Bank leverage ratios have positive relationship with the state-owned and large-scale joint-stock banks and have negative relationship with the small and medium sized joint-stock banks. The promulgation of the Basel III have less obvious positive effects on bank credit; Thirdly, countercyclical financial regulation will affect the operations of financial institutions; The influence of monetary policy on bank credit is more complexFinally combining the balance sheet and the empirical analysis of China, we put forward recommendations about monetary policy’s effect of Countercyclical regulatory tools from three aspects. We should pay attention to bank capital adequacy, strengthen banks’ liquidity management and establish of a more effective mechanism for capital replenishment.