Monetary Policy,Bank Leverage Ratio And Bank Systemic Risk

The report to the 20th National Congress of the Communist Party of China called for strengthening and improving modern financial regulation to prevent systemic risks,and stressed the need to continue to strengthen the financial risk protection system on the new journey.According to the central bank statistics,by the end of 2022,the total assets of China’s financial industry reached 419.64 trillion yuan,among which the total assets of the banking industry reached 379.39 trillion yuan,accounting for more than 90%.These data show that the status of commercial banks in our financial system is irreplaceable and has a "hub" role,so our country has been put on the important position of preventing and defusing bank systemic risk.In addition,commercial banks are inherently vulnerable and profit-driven.Without the guidance of macroeconomic policies,commercial banks will continuously reduce their leverage ratio,which to some extent magnifies the vulnerability of financial markets and increases the possibility of bank risk outbreak.It can be seen that bank systemic risk has become a key link in our country’s systemic financial risk.In addition,with the continuous development and innovation of the financial system,the financial system of our country has grown into a huge scale and complex system with various forms of financial products,plus the financial supervision system in our country is not very perfect,there is also the phenomenon of supervision vacuum,which makes the potential risks of financial system accumulate like a snowball constantly under the low leverage ratio and lack of supervision environment.Thus increasing the chances of systemic risk.In this case,it is required that the central bank should timely formulate a set of monetary policies appropriate to the actual situation,so as to avoid the situation of supervision vacuum and guide the financial system to the right direction.This will contribute to the transformation of the economy toward high-quality development,the rational advancement of financial structural reform,and the rational response to major financial risks.Along with the continuous progress of China’s supply-side structural reform,the reform focus in leverage has shifted from the initial "deleveraging" to "structural deleveraging" in 2018 to the current "leverage stabilization + structural deleveraging".In the late stage of supply-side structural reform,how to use monetary policy to prevent and defuse systemic risks through leverage mechanism is the only way to achieve high-quality development.To sum up,the research on the correlation mechanism between monetary policy,bank leverage ratio and bank systemic risk has certain positive significance for the practice and theoretical development of monetary policy.This paper mainly uses panel data of commercial banks from 2015 to 2021 and relevant macroeconomic data to establish two-way fixed effect model and DK estimation method,empirically studies the mediating effect of bank leverage ratio in the process of monetary policy affecting banks’ systemic risk,and finds that monetary policy has different effects on different types of banks.In the first part,it summarizes and combs the research achievements and research status of domestic and foreign scholars on monetary policy,bank leverage ratio and bank systemic risk.In the second part,it introduces some relevant basic theories,such as the theory of financial fragility,the theory of monetary policy misadjustment,the theory of leverage cycle and the theory of bank run model.On the basis of summarizing the previous literature and introducing the relevant basic theories,the third part systematically summarizes the previous studies on the influence mechanism among monetary policy,bank leverage ratio and bank systemic risk,and puts forward three hypotheses to indicate the research direction of the paper.In the fourth part,the transmission mechanism of monetary policy--bank leverage ratio--bank systemic risk is studied.Based on the panel data of 77 banks from 2015 to 2021 and some macroeconomic data,the two-way fixed effect model is used to study the relationship between monetary policy and bank leverage ratio,bank leverage ratio and bank systemic risk.On the basis of fully considering the nonlinear characteristics of bank leverage ratio and referring to the intermediate effect test method proposed by Wen Zhonglin(2004),it is proved that bank leverage ratio is an intermediate variable in the process of monetary policy affecting bank systemic risk.In addition,the leverage ratio below the median is defined as low leverage ratio,so as to study whether monetary policy has a certain strengthening effect on the systemic risk of banks under the condition of low leverage ratio.In order to explore the heterogeneity of the impact of monetary policy on the systemic risk of banks,this paper compares and analyzes the regression results of the two models,namely the bidirectional fixed-effect model and the DK estimation method,and finds that the regression results of the DK estimation method can better explain the actual situation than the bidirectional fixed-effect model.In the fifth part of the thesis,the thesis summarizes the research results and puts forward some policy recommendations to our monetary policy related practices.Firstly,there is a positive relationship between monetary policy and bank leverage ratio.Loose monetary policy leads to lower bank leverage ratio.However,there is an obvious negative relationship between monetary policy and bank systemic risk,that is,the looser the policy,the greater the risk.Secondly,bank leverage ratio is an intermediary variable,which plays an intermediary role in the process of monetary policy’s influence on bank systemic risk.In addition,this paper also verifies that the leverage ratio of banks is not a simple linear effect in the mechanism of monetary policy affecting bank systemic risk,but a nonlinear feature and verifies that when the leverage ratio of banks is low,the monetary policy has a certain strengthening effect on the impact of bank systemic risk.Finally,through the comparative analysis of the bidirectional fixed effect model and DK estimation method,it is found that the direct impact of monetary policy on the systemic risk of different types of banks shows heterogeneity,that is,monetary policy has a significant direct impact on the systemic risk of national banks.The direct impact on regional banks is limited.