2019 China Finance Review International Conference (CFRIC)

3 / 2019-04-11 14:12:52

Do reserve requirements raise banks’ risk-taking?

reserve requirement,banking,risk taking

In this paper, I introduce reserve requirement in Dell’Ariccia et al.(2014)and analyze the effect of reserve requirement on banks' risk-taking as reserve requirement is one of the most important monetary policy tools in China. I find this effect is non-monotonic and depends on banks' capital structure. Moreover, I use the confidential data of banks' loan to business from 2008 to 2015 to quantitatively analyze this effect and confirm the decrease of reserve requirement has a negative effect in banks' risk-taking and this effect depends on banks' capital structure.