Does Bank Liquidity Matter in the Loan Supervision Effect of Bank Capital Adequacy Ratio?
- 1 China University of Petroleum’s Karamay Campus, Karamay, China
- 2 School of Banking and Finance of UIBE, Beijing, China
Abstract
The requirement of bank’s capital adequacy ratio did not prevent the occurrence of financial risk, and then the requirement of bank’s liquidity came into view. Then , the impact of bank capital and liquidity on bank loan changes is a real problem faced by regulators and banks themselves. In this context, we study whether the impact of capital adequacy ratio on loan changes is related with the bank’s liquid asset ratio by constructing theoretical model and empirical analysis method. Our study first shows that the impact of bank’s capital adequacy ratio on loan changes is related with liquid asset ratio. We find that off-balance sheet loan commitments offset the parts impact of liquid asset ratio and capital adequacy ratio on loan changes, and small and medium-sized banks are less affected by liquid asset ratio. Under the condition that banks hold certain liquid assets, bank’s liquid asset ratio is positive with the influence of the capital adequacy ratio on loan changes. Finally, we put forward suggestions from the perspective of bank risk management and bank capital and liquidity supervision.
- Aiyar, S., Calomiris, C. W., & Wieladek, T. (2016). How Does Credit Supply Respond to Monetary Policy and Bank Minimum Capital Requirements? European Economic Review, 82, 142-165. https://doi.org/10.1016/j.euroecorev.2015.07.021
- Bernanke, B. S., Lown, C. S., & Friedman, B. M. (1991). The Credit Crunch. Brookings Papers on Economic Activity, 1991, 205-247. https://doi.org/10.2307/2534592
- Berrospide, J. M. (2013). Bank Liquidity Hoarding and the Financial Crises: An Empirical Evaluation. Fed. Reserve Finance Econ. Discuss. Ser. Working Paper No. 2013-03. https://doi.org/10.17016/FEDS.2013.03
- Brei, M., & Schclarek, A. (2015). A Theoretical Model of Bank Lending: Does Ownership Matter in Times of Crisis? Journal of Banking & Finance, 50, 298-307. https://doi.org/10.1016/j.jbankfin.2014.03.038
- Brei, M., Gambacorta, L., & Von Peter, G. (2013). Rescue Packages and Bank Lending. Journal of Banking & Finance, 37, 490-505. https://doi.org/10.1016/j.jbankfin.2012.09.010
- Carlson, M., Shan, H., & Warusawitharana, M. (2013). Capital Ratios and Bank Lending: A Matched Bank Approach. Journal of Financial Intermediation, 22, 663-687. https://doi.org/10.1016/j.jfi.2013.06.003
- Cornett, M. M., McNutt, J. J., Strahan, P. E. et al. (2011). Liquidity Risk Management and Credit Supply in the Financial Crisis. Journal of Financial Economics, 101, 297-312. https://doi.org/10.1016/j.jfineco.2011.03.001
- Coval, J. D., & Thakor, A. V. (2005). Financial Intermediation as a Beliefs-Bridge between Optimists and Pessimists. Journal of Financial Economics, 75, 535-569. https://doi.org/10.1016/j.jfineco.2004.02.005
- Dai, J. X., Ma, L., & Huang, X. (2009). Bank Lending Behavior and Scale under Capital Constraints: An Analysis Based on Capital Characteristics. Economic Review, No. 6, 40-46.
- Gambacorta, L., & Marques-Ibanez, D. (2011). The Bank Lending Channel: Lessons from the Crisis. Economic Policy, 26, 135-182. https://doi.org/10.1111/j.1468-0327.2011.00261.x
- Gambacorta, L., & Mistrulli, P. E. (2004). Does Bank Capital Affect Lending Behavior? Journal of Financial Intermediation, 13, 436-457. https://doi.org/10.1016/j.jfi.2004.06.001
- Gorton, G., & Winton, A. (2017). Liquidity Provision, Bank Capital, and the Macroeconomy. Journal of Money, Credit and Banking, 49, 5-37. https://doi.org/10.1111/jmcb.12367
- Guo, Y., & Mo, Q. (2006). Capital Constraint and Credit Squeeze. Financial Research, No. 7, 134-142.