The Research Of The Risk Spillover Of China’s Commercial Banks

With the openness of China’s financial markets, risk measurement and analysisof the commercial banks in the financial risk management has important theoreticaland practical significance. Due to the associated liabilities between banks,thenegative externalities of the bankrupt banks will accumulate huge systemic risk.Therefore, in-depth analysis of the source of financial risk, and accurate and effectivemeasure of the risk can improve our ability to prevent financial risks.Financial risk was a systematic, global features. As systemic risk was the causeof the U.S. subprime mortgage crisis in2008, macro-prudential supervision ofsystemic risk has become a focus on the core. In2001, China’s entrance to the WTO,and the continued opening of financial markets, China’s financial system has facedgreater systemic risk exposure. The banking system is the core of the financial system.As the balance sheets between banks are closely related, many banks will takehomogeneity investment management action to obtain higher profits, and thesemarket behaviors can raise the pro-cyclical and relevance of the financial systemitself, potentially increasing the systemic risk. Being emphasized in the new BaselIII,the banking systemic risk come to people’s eyes. Effectively measure is theprecondition of regulatory risk, so systemic risk can be used to quantify risk spillovereffect between organizations.The traditional VaR risk measurement methods focus on the maximum loss of asingle agency in the independent environmental, but the use of historical datameasure VaR value underestimate the pressure conditions because of the inter-agencyrisk spillover..In2009,Adrian proposed the CoVaR method to measure theinter-agency risk spillover. Based on the quantile regression CoVaR method,we measures the spillovereffect of China’s16listed commercial banks.Our study has shown that VaR value andCoVaR value have no obvious correspondence. CoVaR can be a good estimate onmeasuring the risk spillover between agencies in a extreme situation.Through thismeasure we can determine the systemically important institutions. The state-ownedjoint-stock banks have greater systemic risk spillovers; joint-stock banks, commercialbanks or regional monopoly commercial banks has higher contribution ChinaMerchants Bank and the Industrial Bank over the CCB and BOC were ranked thirdand fourth; regional commercial banks are ranked at the end.As cross sectional dimension of risk supervision,the regulatory authorities haveto determine systemically important Banks. Through effective oversight of riskimportance mechanism can we achieve the maximum system utility. In this paper, therisk between China’s listed commercial Banks can effectively be quantitated.Thesewill help financial supervision and regulation department to timely capture the riskintensity between Banks, and to carry on the monitoring and management of high riskspillover mechanism, in order to maintain the stability of financial markets.