Commercial Banks Procyclicality And Supervision In China

The US subprime mortgage crisis in 2008 triggered not only a large number of financial institutions went bankrupt, and further spread to the real economy, not only the United States, Europe, Japan and other developed economies appear more severe economic and financial crisis, China and other emerging market countries, and therefore subject to the impact of the global economic recession sharply, today is still walking in the slow recovery track. The original model of financial regulation on commercial banks in particular Basel Ⅱ regulatory framework established on the basis of being a huge question. On the causes of the subprime crises, academia and government organizations have not yet reached a consensus, but studies have shown that pro-cyclical financial institutions and the financial system close to the outbreak of systemic risk and the lack of awareness and control of the crisis can not be separated, the original micro-prudential regulatory framework based on both unable to overcome the pro-cyclical, but also unable to reduce systemic risk in the financial system. In the original micro-prudential management principles, commercial banks have a strong pro-cyclical, which is reflected in one hand, pro-cyclical in the existing regulatory framework, as a commercial bank management and financial supervision cushion core capital (capital have between adequacy ratio) with a high degree of correlation between economic growth, leading to the establishment of micro-prudential regulatory framework based on the failure of the buffer capital of commercial banks to ensure the role of commercial banks failed to achieve stable operation; on the other hand, credit, asset quality, liquidity status indicators reflect the behavior of commercial banks also showed a significant pro-cyclical, exacerbating the cyclical fluctuations in the economy, the real economy has brought greater impact and cause and exacerbate instability in the financial sector. Requiring scientific assessment to determine pro-cyclical features of commercial banks, the establishment of a regulatory framework based on a counter-cyclical macro-prudential management to weaken and try to eliminate the procyclicality of financial institutions to prevent and mitigate systemic financial risks for commercial banks to weaken Positive feedback effects of the economic cycle.Based on the macro-prudential and financial institutions procyclical theoretical studies to clarify the evolution of the concept of macro-prudential and further study of the concept of pro-cyclical, meaning and performance. To study the characteristics of China’s commercial banks procyclical, the paper of 16 listed commercial banks in 2004 and 2014 the capital adequacy ratio, the net return on capital, non-performing loan rate of quarterly data, based on the commercial banks and capital buffers business behavior empirical analysis, building analysis model through the relevant economic theory, the use of GMM method (GMM) dynamic panel data methods to analyze the relevance of China’s commercial banks under the existing regulatory framework in the buffer capital and economic cycles. At the same time, the use of Jonhanson cointegration and vector error correction (Vector Error Correction) model to study between 2004 and 2014 China’s commercial bank credit, long-term relationship asset quality and liquidity conditions and economic cycles.The results show that both capital buffers, or credit, asset quality, liquidity and other business indicators, China’s commercial banks under the existing regulatory framework, both showed significant pro-cyclical. Data analysis and quarterly results of pro-cyclical behavior of commercial banks in the short term, showing some differences and some scholars use annual data analysis concluded. Empirical Analysis of the full range of commercial bank capital buffers and business activities, makes sure you get each other proven and reliable empirical conclusions, and use the data longer period quarterly data, making the sample size is much larger than annual data for a sample of empirical analysis, further ensure the validity of the data results. On the basis of empirical research, this paper proposes policy measures based on the counter-cyclical macro-prudential supervision, and strive to further improve China has begun to explore the establishment of a macro-prudential policy framework.