Abstract: By constructing a dynamic panel data model, this paper conducts an empirical analysis of the relationship between heterogeneity, credit decision and monetary policy transmission of 28 major urban commercial banks in China over the period from 2004 to 2010 with the System-Generalized Method of Moments. The results show that profitability, capital level and deposit can play a significant supporting role in bank lending; however, a strong inertial expansion can be seen in their credit lending, at the same time the risks are not efficiently under control and the management capabilities on liquidity are obviously insufficient. Those of them with advantages on profitability, deposit scale and risk control can better adjust their bank lending and reduce the negative shocks from monetary policy.

Key words: bank heterogeneity; monetary policy; credit decisions; urban commercial bank