The Research On Countermeasures Of Bank’s Risk On The Government Debt Crisis

The European sovereign debt crisis makes the euro zone that has yet to recover fromthe global financial crisis in trouble again. As the major holder of Europe’s sovereign debt,European banking sector is directly affected by the European sovereign debt crisis.European banking sector produces the large risk exposure, and European banking system isfaced with enormous default risks. The review of history tell us that the government debtcrisis tends to cause and aggravate bank’s risks, and leads to bank’s failures and collapse,then forms the complex financial crisis in which the debt crisis and bank risk areintertwined. The complex financial crisis poses great threat to international financialstability. Thus, the research on mechanism of action and the influence degree of thegovernment debt crisis on bank’s risk has a far-reaching influence on effectively cutting offthe transmission of risk between the two subjects and maintaining the stability of the worldfinancial order. From the academic achievements at home and abroad, the research on theinfluence of the government debt crisis on bank’s risk is not in-depth and is basicallyconfined to a particular aspect. Therefore, this paper is to study the content of mechanismof action, the influence degree and underlying reasons of the government debt crisis onbank’s risk, then put forward the prevention and control policy and warnings to China.This paper is based on the existing literature. Firstly, reviewing the process of themain government debt crisis, and adopting qualitative methods to analyze the actionmechanism of the government debt crisis on bank’s risks, then respectively discussing threepaths that the government debt crisis leads to the bank credit risk, market risk and liquidityrisk. Secondly, taking the European sovereign debt crisis as an example from theperspective of quantitative analysis and analyzing the influence degree of the factors ofgovernment debt crisis on bank’s risk by the panel data regression model. The conclusion isthat the fiscal expenditure’s impact is the biggest, the government payment and financingability’ impact is larger and the scale and structure of foreign debts is the minimal impact.According to the empirical results, we can analyze reasons why the influence degree of the factors of government debt crisis on bank’s risk is different. The last, this paper putsforward countermeasures of bank’s risk on the government debt crisis, and refers topreventive measures of the problem putting forward the control strategy according to theactual situation of China.