Demonstration Of Capital Regulation Effectiveness On Chinese Commercial Banks Performance

As the measures for new characteristics of risks on commercial banks in the Subprime Mortgage Crisis,the Basel Accords III was released by Basel Committee on Banking Supervision in 2010.And it quickly became a well-accepted principle in major countries and economies globally.To respond the call and fulfill the compliance,Chinese banking regulator announced a few capital regulation profiles with multiple capital regulation indicators;some of them are brand-new for Chinese finance market.While interest rates liberalization accomplished in 2015,Chinese commercial banks started to face strong pressure coming from domestic economic restructuring,risk of exchange rate and risk of interest rate;meanwhile,they were also urged to improve the status and role of international banking industry.It becomes an urgent subject for regulator,academe and practice to consider: how to optimize capital regulation to keep stability of banking system and maximize the business performance of commercial banks at controllable risks.The article performs demonstration by theoretically analyzing capital regulation influence paths on commercial banks performance,making use of panel data of 43 listed commercial banks in China through 2011 to 2017 and executing analysis with Multiple Linear Regression and Stochastic Frontier Analysis models.It verifies the correlation among Capital Adequacy Ratio(CAR),Leverage Ratio(LR),Loan Loss Provision Ratio(LLPR)and commercial banks performance.The analysis shows: CAR,LR and LLPR all have negative impact on commercial bank performance.However,the different regulation indicators have different conduction paths respectively.Accordingly,the article gives following suggestions: banks should define the best range of different regulation indicators on their own basics;banks and regulator should keep monitoring the interactions among different regulation indicators.