Monetary Policy And The Risk-taking Behaviors Of Commercial Banks

The last financial crisis took place in a long-term low interest rate environment.The long-term loose monetary policy changed the risk preference and risk-bearing willingness of commercial banks and spawned asset price bubbles,which eventually led to systemic financial risks.In order to cope with the financial crisis,Chinese government took decisive positive monetary policies,which stimulated to economic recovery in very short-term.However the long-term effect of these policies was unsatisfactory.Through the process of financial crisis,people began to think about the role of monetary policy in maintaining macro financial stability.At the same time,more and more scholars began to pay attention to the relationship between monetary policy and the risk-taking behaviors of commercial banks.So,does the risk-taking channel of monetary policy really exist,in our country's long-term low interest rate environment?Whether the types of risk-taking behaviors of commercial banks can be differentiated and defined?Do monetary policies have different effects on different types of risk taking behaviors of commercial banks?Whether the monetary policy can affect the scales of bank investment and credit by changing the risk-taking behavior of commercial banks?First of all,this paper reviews the literature and found that the previous studies mainly focus on two main problems:The existences of the risk-taking channel of monetary policy and the influence of microscopic characteristics variables on the banks.However,these studies pay less attention to the types of risk-taking of banks.Then,based on the micro panel data of 2007-2016 years of 63 commercial banks in China,this paper uses the dynamic panel model to analyze the impact of monetary policy on risk-taking behaviors of commercial banks.After that,the empirical results are analyzed to verify the existence of the risk-taking channels of monetary policy and the heterogeneity influences of monetary policy on commercial banks' active and passive risk-taking.On the basis of the theories of the risk-taking behaviors of commercial banks,this paper sets up several variables to build up empirical models and draws following conclusions through the analysis of the results:Firstly,the risk-taking channel of monetary policy does exist.Under the loose monetary policy environment,monetary policy affects the real economy mainly through indirectly ways of active risk-taking behaviors of commercial banks,which means active risk-taking play a leading role in the transmission mechanism of monetary policy.Under the tightening monetary policy environment,monetary policies affect the real economy mainly through indirectly ways of passive risk-taking of commercial banks,which means the passive risk-taking behaviors of banks play a leading role in the transmission mechanism of monetary policy.Secondly,on the one hand,monetary policy and active risk-taking of banks are negatively correlated and the commercial banks with high capital adequacy ratios and asset size,tend to take lower risk.On the other hand,the monetary policy and passive risk-taking behaviors of banks are positively correlated and the banks with high capital adequacy and small loan size,can control the rate of non-performing loans better.Finally,the risk-taking behaviors of commercial banks have the effect of financial accelerator,which means,without the interference of external factors,the risks of commercial banks have cumulative effects and can not be self digested.Therefore,in order to maintain financial stability and decrease financial risks,China can take the following measures:Firstly,the risk-taking behaviors of banks needs to be incorporated into the analytical framework of monetary policy.Secondly,develop the regulatory indexes according to the differences between the active risk and the passive risk of commercial banks to strengthen the prevention and supervision of the risk of the banks.Thirdly,establish macro prudential management mechanism to adjust the financial cycle,which could help to prevent financial risks and promote the sustainable development of the economy.Fourthly,speed up the process of interest rate marketization reform in China,and realize the transformation of monetary policy from quantitative regulation to price regulation.