A Study on the Effects of Loan-to-Value ratio on the Financial Soundness of Commercial Banks

Abstract

The purpose of this study is to investigate the effect of housing finance regulation on the banking management performance by analyzing the changes in the financial soundness of banks and changes in housing finance regulation. For this purpose, the independent variables such as changes in the amount of housing market, mortgage lending rate, housing transaction volume, house price, housing supply, and household nominal income are set. The dependent variables are BIS(Bank for Internationl Settlement) capital adequacy ratio, classified loan ratio, and respectively. The rate of mortgage recognition was selected as a control variable. The results of the study are as follows. The increase in housing transactions has reduced the ratio of equity capital and classified loans. This implies that the increase in lending due to housing transactions has led to a decline in equity compared to loans, and that the loan generated at this time is a stable loan with a stable repayment potential. This means that the increase in loans caused by housing transactions has affected the decline in equity capital compared to loans, and that the loan generated at this time is a stable loan with a stable repayment potential. Furthermore, the bank's own loan review suggests that it has not already made risky loans enough and that excessive government regulations are infringing on the bank's autonomy. In other words, it can be seen that housing financial regulations are adversely affecting the reduction of banks' capital adequacy ratios due to interest rate hikes. This study presents research on real estate market stabilization policies such as housing supply expansion policies other than housing financial regulations that adversely affect the bank's financial health, while proposing ways to mitigate bank management shocks if housing financial regulations are inevitable.