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Article

Construction and Empirical Research on the Dynamic Provisioning Model of China’s Banking Sector under the Macro-Prudential Framework

by 1,* and 2,*
1
School of Economics and Management, Harbin Institute of Technology, Harbin 150001, China
2
Antai College of Economics and Management, Shanghai Jiao Tong University, Shanghai 200030, China
*
Authors to whom correspondence should be addressed.
Sustainability 2020, 12(20), 8527; https://doi.org/10.3390/su12208527
Received: 5 September 2020 / Revised: 30 September 2020 / Accepted: 7 October 2020 / Published: 15 October 2020
Since the international financial crisis in 2008, to achieve the political goal of financial stability, academic circles, financial industry, and regulatory authorities worldwide have deeply reflected on the current economic regulatory theories and policy adjustment tools through introducing the macroprudential policy. The dynamic provisioning system is a counter-cyclical policy tool in the macro-prudential adjustment framework widely used in the world. This paper uses the binary Gaussian Copula function to combine the measurement method of the default distance in the contingent claims analysis method with the risk warning idea based on the Probit model and proposes the contingent claims analysis (CCA)–Probit–Copula dynamic provisioning model based on nine forward-looking indicators. Based on China’s actual conditions, this model solves present problems faced by the current dynamic provisioning system in China, such as insufficient historical credit data reserves of commercial banks, excessive reliance on subjective judgments, and conflicts with the current accounting system. Moreover, this model can put forward corresponding counter-cyclical provisioning requirements according to the influence degree of macro-cyclical factors to different commercial banks’ own default risk, which not only takes into account the security and liquidity of commercial banks, but also ensures their profitability and competitiveness. Based on the empirical test of historical data from listed commercial banks in China, it proves that the dynamic provisioning requirements proposed in this model can effectively adjust the overall credit scale of the banking industry in counter-cyclical ways, thereby achieving the policy goals of counter-cyclical adjustment under the macro-prudential framework and maintaining the security of China’s financial system and the sustainable development of the macroeconomy. View Full-Text
Keywords: dynamic provisioning; macroprudential supervision; counter-cyclical adjustment dynamic provisioning; macroprudential supervision; counter-cyclical adjustment
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MDPI and ACS Style

Hui, X.; Zhang, A. Construction and Empirical Research on the Dynamic Provisioning Model of China’s Banking Sector under the Macro-Prudential Framework. Sustainability 2020, 12, 8527. https://doi.org/10.3390/su12208527

AMA Style

Hui X, Zhang A. Construction and Empirical Research on the Dynamic Provisioning Model of China’s Banking Sector under the Macro-Prudential Framework. Sustainability. 2020; 12(20):8527. https://doi.org/10.3390/su12208527

Chicago/Turabian Style

Hui, Xiaofeng, and Aoran Zhang. 2020. "Construction and Empirical Research on the Dynamic Provisioning Model of China’s Banking Sector under the Macro-Prudential Framework" Sustainability 12, no. 20: 8527. https://doi.org/10.3390/su12208527

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