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Multi-Market Competition and Bank Risk-Taking from the Perspective of Interest Rate Liberalization and Different Supervisory Dimensions

【Authors】
GAO Dongxi, XIANG Houjun
【WorkUnit】
GAO Dongxi (Sun-Yat San University, 510275)XIANG Houjun (Guangdong University of Finance, 510521)
【Abstract】

Based on the significance of the impact that market competition has on bank risk-taking under the interest rate liberalization reform and against the background of increasing financial regulation, this paper uses the 2009-2017 panel data to investigate how multi-market competition affects the bank risk-taking under the interest rate liberalization reform. Furthermore, we introduce different regulatory dimensions to discuss the effects of multi-market competition on bank risk-taking under the interest rate liberalization and financial regulation. The results show that: for the traditional loan and deposit markets, the loan market competition has significantly suppressed the risk-taking of China's banking industry and all types of banks, and the liberalization of loan interest rates has further strengthened this effect, but not for state-owned banks. While the deposit market competition significantly improves the risk-taking of China's banking industry and all types of banks, the liberalization of deposit interest rates has not further strengthened its impact, except for local banks. For the wealth management market, its market competition will significantly increase the risk-taking of China's banking industry and various types of banks, and the interest rate liberalization reform will further increase this positive correlation. After incorporating multiple dimensions of regulatory factors, this paper finds that ex-ante and ex-post regulation can effectively increase the inhibitory effect of the liberalization of loan interest rates and market competition on bank risk-taking. However, for the wealth management market, only ex-ante regulation can significantly weaken the positive impact of the interest rate liberalization and market competition on bank risk-taking.


JEL:C33, E43, G21

【KeyWords】
Market Competition, Interest Rate Liberalization, Different Regulatory Dimensions, Bank Risk-Taking