The Regulatory Effects of Capital Adequacy Ratio——The Applicability of Basel III Accord

This paper empirically analyses the regulatory effects in the trial period of regulatory measures of capital adequacy ratio(2007~2011). The results show that, on the one hand, the total capital adequacy ratio has a negative correlation with nonperforming loan, but the regulatory pressure, caused by capital regulation, on bank system is limited, therefore, the risk management of banks needs more effective regulatory measures; on the other hand, the increase in capital adequacy ratio promotes banks to improve their performance and enhance their competitiveness, thus, the new regulations of capital are conducive to the development of China's banking industries. Therefore, China's commercial banks should further improve their risk monitoring systems, effectively monitor hidden risks, amend risk measurement methods appropriately, raise the weights of the credit risks of loans and the investment risks of bonds in index computation so as to meet the risk regulatory requirements for China's commercial banks, improve their own management level and operational ability, make use of counter-cyclical capital buffers to improve the ability to resist impacts.