Effect of Capital Control on Bank's Loan Preference

Financial supervisory authority can guide the steady and harmonious development of macroeconomy by taking advantage of the strong constraint of capital controls on commercial banks. This paper firstly applies multilateral game to analyze the bank's loan behavior characteristics, secondly, with vectors and virtual coordinate system, discusses the effects of capital requirements on the loan preference and credit structure of commercial banks. It draws the conclusions that the big banks prefer to provide loans for big enterprises and that small banks prefer to compete for big projects by organizing a consortium. At the same time, this paper finds out the conditions on which banks of different scales implement cross-border loan, and proves that the alteration of capital adequacy ratio requirements would force the commercial banks to adjust credit structure along the efficient frontier broken line or the efficient frontier plane.