Factor Analysis-based Commercial Bank Systemic Risk Research

Systematic risk is that the main banks bring affect to the otherbanks' management and exist by their failure. This affect that makes thebank system lose the fundamental function may be random, accidentaland uncertain. Systematic risk has these characters, for example,universality of the body, amplification of the risk, Outside of the risk,infectivity of the risk.On the basis of other theories, we do demonstrate analysis to thesystematic risk of Chinese banks from 1994 to 2006 using factor analysismethod. Research indicates that though systematic risk of Chinesecommercial bank has been relieved over the past few years, it is still on ahigh level. The bank must strengthen the research to the systematic risk toprevent from its breakout. Basing on the studying in this paper, we givesome suggestions to the management sections, for example, handling badproperty, establishment early warning mechanism, and improve systemconstruction to the banks in order to reduce its systematic risk.