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The Research on Weakening Operating Models of Procyclicality of Commercial Bank of China

Author: YuYao
Tutor: ZhaoAiLing
School: Dongbei University of Finance
Course: Finance
Keywords: business-cycle procyclicality dynamic provisioning pressure-test
CLC: F832.33
Type: Master's thesis
Year: 2010
Downloads: 188
Quote: 0
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Abstract


Commercial Banks are natural chasing profit enterprise, the profit maximization is its business objectives. Commercial Banks of the profits orientation is by capital depends on the features of, this will inevitably lead to the business management mode is the cycle, namely: in the economic boom, commercial Banks to profit from the longing, often could not restrain lending impulse, tend to expand credit issued, reduce the credit standards; And in the economic depression, in order to avoid risk, commercial Banks will be tighter credit loan scale, improve threshold. Commercial Banks of the management mode of the cycle in a certain extent to accelerate the economic cycle and promoted economic cycle formation, even aggravate business cycle.at, make economic from prosperity to overheat or into recession. Meanwhile, in order to stabilise the economy, the central government and central bank adopts macroeconomic policies are usually inverse of the economic cycle, commercial bank shun cycle management pattern often undercut macroeconomic policy effect, which is unfavorable to the economic and social stability.From 2007, America’s subprime crisis to deepen, then become swept across the global financial crisis, a large number of financial institutions to collapse, the fed’s loose monetary policy and Wall Street excessive financial innovation is the direct cause, however, commercial bank shun cycle management is one of the financial crisis in its economic contributor to the prosperous period, reduce credit standards, to no reimbursement ability of large extend housing loans, people in the subprime crisis after the outbreak, quickly tighter credit and wasted by flood market liquidity into scarce, the potential risks into reality, the appearance of a large number of non-performing assets, oneself suffered huge losses, the bank insolvency, resulting in bankruptcy.Our country commercial bank’s business model is a kind of typical shun cycle management pattern, loan growth rate and the economic growth rate and its imbalance, and has the extraversion, by the effects of macroeconomic policies is very big. Commercial bank management is often lies in the cycle of profit and risk tradeoff, however this kind of rational choice tends to cause the irrational, bank group in the short term may obtain arrogant person’s achievement, but also slowly gather a lot of potential risks, when economic occurrence inflection point into decline channel, potential risk will become a real risk. Due to the boom period of money lending out much more special, so in bubbles collapse bank losses will be particularly heavy.Our country commercial bank’s business model is a kind of typical shun cycle management pattern, loan growth rate and the economic growth rate and its imbalance, and has the extraversion, by the effects of macroeconomic policies is very big. Commercial bank management is often lies in the cycle of profit and risk tradeoff, however this kind of rational choice tends to cause the irrational, bank group in the short term may obtain arrogant person’s achievement, but also slowly gather a lot of potential risks, when economic occurrence inflection point into decline channel, potential risk will become a real risk. Due to the boom period of money lending out much more special, so in bubbles collapse bank losses will be particularly heavy. Shun cycle management model in an economic recession but not willing to outward loan, some strong and have a good profit project enterprise is difficult to obtain loans, but this time is often the most safe, practical and prove this time of payment default rate loaned is very low. This paper studies the weakening of the cycle of commercial Banks in China is to reduce operating mode of commercial Banks operating mode on the cycle of its own risk and economic and social security threats, Suggestions for commercial Banks in economic overheating when to keep a cool head, voluntarily cut in approving loans, loan analyses strict requirements and prevent the formation and encourage bubble burst, prevent a risk avoiding, The economy is in a low point dare to lend money, scientific and reasonable audit loans to help economic recovery, social responsibility of also for yourself for good business performance. A truly healthy, energetic, and sustainable development of the bank is.not those in economic prosperity, economic depression soar when performance when the bank, a great decrease performance should be that kind of both economic prosperity or depression can avoid risk, pressed economic fluctuation on the bank’s performance impact, realize the profit of the steady growth of the bank, and at the same time as the backbone of the economy and society, have automatic stabilisers role of bank. Therefore, the weakening of commercial bank management mode of the cycle is necessary to have the vital significance. This paper firstly introduces the cycle of commercial bank management mode theory analysis, including the commercial Banks to shun cycle management pattern, the definition and characteristics of commercial business model of silver shun cycle three forms, commercial Banks shun cycle management pattern, the reason of the endogenous and exogenous from two aspects of commercial Banks operating the profound reason the cycle in China, and then an empirical analysis of the relationship between the bank credit and output, it is concluded that the following conclusions:1. The commercial Banks in economic expansion time loan growth faster, contraction period, loan growth slower, the periodic apparent in the loan. Our credit market has strong shun periodic, commercial bank management mode is the cycle. But not entirely absolute shun cycle, some years is inverse cycle, but the cycle of the year more.2.1992-2008 in the previous three with loan growth in GDP growth trend is largely has the uniformity, loan growth than GDP growth, and the fluctuation of loan is greater than the fluctuation of GDP. From 2008 the fourth quarter plays in the third quarter, loan by 2010 with GDP growth appears deviation GDP growth lags loan growth.3. Bank loan growth L, monetary supply growth M2 for actual output (GDP) growth has explain ability, from the bank loan growth of actual output growth of the slope (0.32) and P value can see loan growth for actual output growth of effect is remarkable.4. Output is the granger causality of loans. Loan on output less influence than output on loan effects, which smaller GDP volatility will cause bigger debt changes.5. The money supply increase credit does not necessarily lead to increase, and the increased amount of bank credit is will cause the increase of generalized amount, be in namely tightening monetary policy will weaken the monetary policy effect. Then introduces the operation of commercial Banks in China’s economic cycle to the harmful effects, and finally from the macro economic policies, commercial bank itself and regulatory three proposed weakening our country commercial bank shun cycle management model of advice.

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CLC: > Economic > Fiscal, monetary > Finance, banking > China's financial,banking > Financial organizations, banks > Commercial banks ( specialized banks )
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