Why does not loose money bring loose credit? : the role of the risk appetite of commercial banks in the transmission of policies

WEI Wei 1 GUO Zirui 2 CHEN Xiao1

(1.Business School of Beijing Normal University)
(2.Ping An Securities)

【Abstract】Loose monetary policies do not necessarily lead to credit expansion in practice, that is, there is a difference between the so-called loose money and loose credit. The main factor that determines this difference is the risk appetite of commercial banks. China’s financial system is dominated by commercial banks, and the efficiency of its support for the real economy is directly related to the risk appetite of financial institutions. The research of this paper shows that commercial banks’ risk appetite is most closely linked to financial regulatory policies and the real estate prices (main collateral). Given this round of slightly easing monetary policy and continuous slowing credit growth, the trend of strict regulation has not been changed and the real estate market as a whole is in a downward trend. Therefore, commercial banks are under great pressure regarding assets, liabilities and equity. The channel of transmission from loose money to loose credit is not smooth and it will take time for the credit mechanism to be repaired.

【Keywords】 loose money; commercial bank; real estate; loose credit;


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(Translated by LI Mengling)


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This Article


CN: 11-3799/F

Vol , No. 03, Pages 117-132+7

May 2019


Article Outline


  • 1 Theory and extension of financial accelerators
  • 2 The direction of strict regulation has not changed, and the pressure on banks still exists
  • 3 Continuing real estate regulation and accelerating the establishment of the long-term mechanism
  • 4 Conclusions
  • Footnote