Abstract

The effective implementation of the financial regulatory system relies on incentive design affecting the behavior of regulators. In China, similar to local officials, regulators are often promoted through selection processes conducted by their superior, which means regulators facing political incentives. This paper combines Provincial Bureau Chiefs of China Banking Regulatory Committee (BC), representing central financial regulation, and City Commercial Banks (CCB), representing local banks, to examine empirically whether the political incentive of regulators influences the credit generation of local banks. The empirical analysis finds that: firstly, for the capital, asset quality, liquidity and other regulatory indicators, capital regulation performance significantly affects the promotion of BCs; secondly, regulator behavior under the political incentives prompts the CCBs to improve capital adequacy ratio, thereby lowering their credit expansion; finally, under different external environment the political incentives of BCs also generates differential effects on local banks’ credit expansion, such as local government’s credit intervention, business cycle, monetary policy and capital market financing.

Key Words: Political Incentive; Financial Regulation; Capital Regulation; Credit Expansion

下载：政治激励、资本监管与地方银行信贷投放