Translated Abstract
Provision is a kind of reserve to ward off asset risk an compensate for asset loss.Therefore,it is an important line of defense before the capital to Against risks.Chinese commercial banks learn from international experience in provisions and have been more mature.In 2008,provision coverage ratio(PCR) has reached more than 100 percent, 2010--2014 all year at more than 200%. However,whether provision prevents the risk of asset loss effectively should be further studied. This paper studies the determinants of provision of Chinese commercial banksand and can helps us to understand the motivation of provision for Chinese commercial banks, and provides a useful reference for regulatory authorities, in order to enhance the effectiveness of the provision against financial risks.
Based on the analysis of current research, this paper analyzes the provision theories and status quo and leads to theoretical analysis of specific factors. Specific factors include three levels: macro level, regulation level and banking industry level.Macro level analyzes the impact of economic cycles.Regulation level analyzes the impact on the capital adequacy and provision adequacy regulation. Banking industry level analyzes the impact of asset quality, capital management, income smoothing, signaling effects and and other possible factors.Empirical analysis includes two models: micro factors model and macro and banking industry factors model.Then obtains empirical results.
After the analysis of empirical results we draw the following conclusions: (1) the current level of provision of Chinese commercial banks meets with regulatory requirements. The two measuring index to provision adequacy——PCR and loan Provision ratio(LPR) are significantly associated with non-performing loan ratio, indicating that provisions can play the role.(2) Chinese commercial banks do not make use of the provision to adjust the capital adequacy ratio, but the provision for income smoothing effect has a positive impact, provision may exist as forecast signals. (3) provision of Chinese commercial banks has a significant pro-cyclical features, namely in times of economic prosperity there will be less provision, and during a recession there will be more provision. The empirical results show that Chinese commercial banks should be required to continue to strengthen counter-cyclical risk management philosophy. (4) Banking industry features also have an impact on provision. More provision will be needed when banking management efficiency decreases or the overall profitability of banking industry increases.
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