A Study on Bank Risk-Taking Behaviors under the Capital Regulation and Constraints of Bank Asset Allocation Strategies

摘要

It is controversial that whether capital regulation can really reduce the risk of banks. This paper studied the assets allocation behaviors of banks under supervision and explores the effectiveness of capital regulation based on bank asset allocation strategies. We built a linear programming model to find a certain bank's asset allocation strategies under regulation. Then we established relationship between bank's profit and risk to study bank's risk taking behavior. We found that profit and risk are not exactly positively related and that banks need to make strategies based on its goal - maximum profit or minimum risk. The innovation of this paper lies in asset allocation strategies and linear programming solution.