The Research On Systemic Financial Risk Based On Perspective Of Macro-prudenial Supervision And Regulation

The impacts of the US subprime crisis in 2008 on the global economy are disastrous. Countless large banks are suffering massive loss of capital due to the large scale of contract default regarding subprime mortgage, further triggering the subsequent shrink of credit market, decline of social investment level, and economic recession in developed economies. Therefore, the needs of a more sophisticated prudent supervision that combines consideration on both micro and macro level information is urgent.As the degree of market reform and economic and financial internationalization going deeper, the possibility of crushing down of the Chinese financial system is still high for the following reasons. First, Chinese institutions are more likely to be affected by the domino effect due to its high homogeneity. In addition, systemic risks are more likely to be magnified and transmitted because there are not enough risk management tools and trading mechanisms. Last but not the least, financial regulation and techniques are still under developed, increasing the difficulties on policy implementation. With the internationalization of RMB and of financial market, it is of importance and urgency to enhance the existing financial risk management system and to improve the financial risk pre-warning ability.The current thesis firstly picks up the most important banks by calculating the weighted scores and then improves the G-SIBs standard. After calculating the new index, we find that our system importance of banks in China are industrial and Commercial Bank of China, Bank of China, Agricultural Bank of China, China Construction Bank.These banks may develop to systemically important banks:China Bank of Communications, China Merchants Bank, Industrial Bank, Pudong Development Bank, Everbright Bank, China Citic Bank, Minsheng Bank. After comparing the pros and cons of CoVaR MES, and Rsquare, I will use CCA method to measure the risk for each selected bank. Then I will calculate the default distance (DD) with three different weighted methods, namely, via capital weighting, general weighting, and a weighted method that uniquely assumes the whole bank system is the only capital. To further investigate the determinants of the risk shocks of individual bank, my analysis mainly focuses on the scale of the banks, the competition of the bank sector, and non-profit business. The results show that the enlarging the bank scale will lead to increase of systemic risk. Second, I find that the competition within the bank sector is helpful on reducing the systemic risk because it enhances the efficiency between banks. Finally. I also find that there is an inverted'U' relationship between the non-profit business and the systemic risk. The current research also builds up a network transmission model based on the bank's balance sheets in order to stimulate the transmission of risk from bank to the whole financial system. We use the simulation method to simulate the process of bank failures which may cause the systemic risk. Through the transmission model simulation, any one of five big state-owned commercial banks failing may cause the losses beyond imagination. Secondly, risk contagion may cause several rounds,the bigger te default loss rate is, the larger the contagion round number is.Especially, one originality of this study is that I introduce the dynamic general equilibrium model to analysis the function of loss of the macro-prudential policy and the function of loss of the monetary policy. In addition, through a simulation of shock introduced by the crush of bank capital, we analysis the effects of the policies regarding prudent supervision, and regarding financial risk protections. We find that the monetary policy impact through monetary effect increases the money balances. Capital adequacy ratio impact and bank default impact influence the commercial bank credit channel by reducing the credit supply.If the policy is to be used alone, the effect of monetary policy is best.If the policy is used coherently, it's better than to use the macroprudential policy alone.The current thesis has a certain theoretical and practical significance on maintaining the stability of the banking sector, controling systemic financial risk and guarding against financial crisis. Then it provides suggestions and references to better improve the financial statistic index system, systemic risk assessment, create macro-prudential policy tools and strengthen countercyclical macroeconomic regulation.