Regulation of Leverage Ratio, Credit Expansion and Credit Risk of Commercial Banks ()
ABSTRACT
“Basel III” and “Measures for the Administration of Capital of Commercial
Banks” propose to use leverage ratio as a supplement to capital adequacy ratio.
Leverage ratio supervision and capital adequacy ratio supervision jointly
supervise and manage commercial banks. Theoretically, leverage ratio regulation
can inhibit the credit expansion of commercial banks and improve bank
stability. However, it is also possible to increase the risk preference of
commercial banks, and increase the proportion of high-risk assets. It can
generate adverse selection problems, and increase the credit risk of commercial
banks. This paper selects the data of 16 listed commercial banks in China from
2013 to 2018. The empirical results show that leverage ratio regulation will
inhibit the credit expansion of commercial banks, but it will increase the
credit risk of commercial banks. It has different impacts on different types of
commercial banks.
Share and Cite:
Li, L. (2020) Regulation of Leverage Ratio, Credit Expansion and Credit Risk of Commercial Banks.
Open Journal of Social Sciences,
8, 376-396. doi:
10.4236/jss.2020.84027.