Regulatory Requirement, Capital Growth and Financing Behavior of the Bank

Recently, investors are paying close attention to the frequent financing behavior of the banks. Especially after the finance crisis, in order to improve the bank's stability, CBRC raise the capital standard influencing by the Basle Agreement III. Hence the banks are faced with most serious capital pressure. We collect the annual report data of the commercial banks in China, and analyze how the capital requirement affect the bank's behavior of the capital growth, financing form and financing scale. The conclusions indicate that the capital regulation is the direct reason of the bank's financing needs. The bank capital growth is positively correlated with the regulation pressure. Moreover, because the profit growth and the retain income can't keep up with the deposit and the capital growth, the banks have to raise external fund to meet the capital requirement. We also find banks tend to choose equity financing. But when the regulation pressure isn't very tight, banks may choose debt financing.