| Summary: | 碩士 === 國立東華大學 === 國際企業研究所 === 90 === This paper examines the changes in bank's behavior between old capital adequacy regulations (1993) and the new capital adequacy (1998) implemented in Taiwan. We investigate whether banks adjust their portfolios by changing their risk-taking behavior to accommodate the regulatory requirements under the new rules. In the mean time, we also study the relationship between changes in capital adequacy ratio and changes in risk. We conduct means test and GLS to investigate the adjustments in bank’s portfolio and then utilize a simultaneous-equation model to analyze changing patterns in bank capital and risk level. For the simulation for future new capital adequacy regulations (2005), we adopt the means test to compare the difference in capital adequacy ratio and bank risk-taking behavior between the new regulations and the future new ones.
Our major findings are as follows.
(1) During the periods of new rules, banks increased the holding of higher risk-weighted assets. The reaction of the undercapitalized banks to the new capital regulation was not to adjust their portfolio toward lower risk-weighted assets.
(2) There is a significant positive relationship between changes in capital adequacy ratio and changes in risk-taking during our entire study periods. Regulatory pressure cannot effectively lead the undercapitalized banks to increase their capital adequacy ratio.
(3) For the simulation of future capital adequacy regulations, bank holds loans internally credit rated from A+ to A-, the results of uniform distribution, nearly normal distribution, right-skewed distribution of loans credit ratings demonstrate that the future new rules will not significant impact on a regular bank’s capital adequacy ratio. In contrast, a bank holds more low-risk-weighted assets (credit rated from AAA to AA+) or high-risk-weighted assets (credit rated below BBB+), the difference of the impact between the new rules and the future new rules on the capital adequacy ratio is significant.
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