The Impact Of Cross-Border Capital Flows On Bank Risk-Taking:A Macroprudential Perspective

With the deepening of two-way opening-up in China’s financial sector,cross-border capital flows are increasingly active,which not only promote the economic and financial development in China,but also accompany financial risks and have a far-reaching influence on financial stability.As the core of the financial system,the steady operation of commercial banks is the basis of financial stability.However,when cross-border capital inflows increase,excessive risk-taking tends to occur,resulting in a pro-cyclical accumulation of financial risks and a concentrated outbreak of risks when cross-border capital flows out suddenly.This puts forward higher requirements for improving the modern financial regulatory framework.China continues to strengthen macro-prudential management,improve the framework of macroprudential supervision and impose stricter prudential supervision standards on banks,in order to reduce risk preference and behavior of banks and maintain financial stability.Based on this background,this paper deeply studies the impact of cross-border capital flows on Chinese bank risk-taking,and further explores the effectiveness of macroprudential policies in managing cross-border capital flows.Firstly,the paper analyzes the influence mechanism of cross-border capital flow on bank risk-taking theoretically.Secondly,this paper selects 141 Chinese commercial banks from 2010 to 2021 as research objects,uses the twoway fixed effect model to empirically test the impact of cross-border capital flows on bank risk-taking,and compares the differences in the impact of different types of cross-border capital flows.Thirdly,the intermediary effect model is used to analyze the mechanism of cross-border capital flows on bank risk-taking.In addition,the paper analyzes the heterogeneity of the impact of cross-border capital flows on the risk-taking of banks of different types and sizes.Finally,the regulatory effect model is used to explore whether macroprudential policies can effectively manage cross-border capital flows and reduce the impact on bank risk-taking,and through further classification,the differences in the regulatory effects of macroprudential policy tools with different objectives are compared.The results show that:First,through the aggregate effect analysis,the increase of crossborder capital flow will increase bank risk-taking.Further,cross-border direct investment will reduce bank risk-taking,while cross-border indirect investment will increase bank risk-taking.Secondly.through the intermediary effect analysis,it is found that cross-border capital flow increases bank risk-taking by reducing bank profitability and increasing bank credit growth.Third.through the heterogeneity analysis,it is found that the impact of cross-border capital flow on the risk-taking of urban and rural commercial banks is more significant than that of joint-stock banks,but has no impact on nationalized banks.Cross-border capital flows have a more significant impact on large banks’ risk-taking than small ones.Fourth,through the analysis of regulatory effects,it is found that macroprudential policies can effectively regulate the impact of cross-border capital flows on bank risk-taking.Specifically,policy tools aimed at improving the financial system’s ability to withstand negative shocks are more effective,while those aimed at restraining the pro-cyclicality of the financial system have no significant effect.