Research On The Impact Of Financial Administrative Penalties On Bank Risk

The outbreak of the 2008 financial crisis showed the importance of strengthening regulation of financial institutions.However,banks can circumvent capital regulation by changing their operating models and conducting shadow banking,which can affect the effectiveness of regulation and lead to the accumulation of financial risks.In order to further prevent and resolve financial risks,China’s regulators vigorously rectify financial chaos and frequently uses ex-post disciplinary tools such as administrative penalties to discipline banks’ risky behavior.Compared with ex-ante constraints such as capital supervision,financial administrative penalties need to enter the bank’s office site for inspection,which can more directly deter banking institutions and practitioners;the penalty information is published in a special column of the China Banking and Insurance Regulatory Commission,which can better guide the work of the bankers.And the banking industry officially implemented the double penalty system in 2015,holding institutions and individuals accountable for both illegal cases,further demonstrating the regulator’s zero tolerance for high-risk bank behavior.In addition,the banking industry implemented in 2015,which simultaneously pursues the responsibility of institutions and individuals for violations of the law,that further demonstrates the regulator’s zero tolerance for high-risk behavior.According to the deterrence effect and punishment spillover effect,financial administrative punishment can effectively restrain bank risks.However,there is controversy about the effect of financial administrative penalties,and related research not only lacks the perspective of bank systemic risk,but also fails to consider the differential impact of different penalty objects and specific economic consequences of forfeiture on bank individual risk and systemic risk.Based on that,with banking administrative penalty data and panel data of China’s160 banks in 2008 – 2020,this paper analyzes the differential impact of administrative penalties on bank individual risk and systemic risk.Drawing the conclusions: Total number of administrative penalties and the number of penalties imposed on banking institutions and responsible persons can significantly demotivate bank individual risk and systemic risk;Due to the large differences in forfeitures between different businesses,forfeitures do not have a significant impact on bank individual risk but helps reduce systemic risk.The above conclusions have passed the robustness test.Finally,combining the theoretical analysis with the empirical findings,this paper puts forward relevant suggestions to the regulators: firstly,they should continue to improve regulatory capacity.Secondly,they should improve the design of financial administrative penalty system and continuously promote the efficient implementation of financial administrative penalty.