Loan lending practices of commercial banks under loan- to-deposit ratio regulatory constraints
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| Title | Loan lending practices of commercial banks under loan- to-deposit ratio regulatory constraints
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| Author | Li Minghui, Liu Liya and Huang Yeni |
| Organization | East China Normal University; Shanghai University of Finance and Economics |
| Email | mhli@sfs.ecnu.edu.cn；liuliya@mail.shufe.edu.cn、yenih@163.com |
| Key Words | Loan-to-Deposit Ratio; Regulatory Constraints; Optimal Lending Decisions; Seemingly Unrelated Model |
| Abstract | This topic come from "Commercial Bank Law Amendment (Draft)" deleted loan deposit regulatory ratio in June 2015. In this paper, we construct two optimal commercial banks loan decision theory model. The First one is model with the constraint of the loan-deposit ratio ceiling, another one is model without. We find that optimal new lending levels by banks would be affected by loan stock, loan-deposit ratio, deposit scale, the level of bank risk appetite and risk-adjusted rate of return limit. Based on this theory model result, we using the 2000 - 2014 micro data of China's banking sector, empirically test decision-making behavior with loan-deposit ratio ceiling. The results showed that: China's commercial banks new mortgage and new corporate and commercial loans are not subjected to loan-deposit ratio limit. Thus, relax loan-deposit ratio ceiling, commercial banks for housing mortgage and corporate and commercial new loans will not increase, but the new consumer and retail loans will significantly increase, because a significant positive coefficient of loan-deposit ratio. Finally, this paper summarizes the theoretical and policy significance from the conclusions of the article. |
| Serial Number | WP1024 |
| Time | 2016-02-02 |
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