Market Competition,loan Loss Provision And Bank Risk

With the continuous deepening of the market-oriented reform in banking system recently,the market competition in banking industry has become increasingly fierce.Due to the pressure from competition and target profit level,banks have to lower the threshold for borrowing loans,which has increased the proportion of risk assets.This paper uses the data of 141 Chinese commercial banks from 2007 to 2016 to comprehensively analyze the impact of loan loss provision on the relationship between competition and risk,as well as its market feedback.The conclusions are as follows: First,market competition has significantly increased the loan loss provision of Chinese commercial banks,especially discretionary loan loss provision,which shows the crisis awareness of management in such a competitive environment;secondly,the heterogeneity of bank size and regulatory constraint has affected the regression results;finally,loan loss provision,as bank's management and regulatory authority wish,lessens the impact on bank risk of market competition.Further analysis found that our banking industry has not yet formed a timely and effective market discipline,and it is unable to accurately identify and distinguish the two types of risk information contained in the accounting index of loan loss provision.Compared with such financial indicators,the implicit guarantee from government and the scale effect of large banks have a greater impact on the decisions of bank creditors.The results will not only help banks improve their risk management mechanisms,but also help regulators formulate reasonable indicators of loan loss provision to guide healthy competition among banks.This paper makes significance to the stability of financial system and the deepening of market-oriented reform.