The Measurement Of Mainland China And Hong Kong’s Banking Systematic Risk

Since the1980s, the global large-scale financial crisis has occurred many times. This phenomenon of risk transferring between financial institutions caused the attention of the countries, financial regulators and scholars from all over the world. Then there is a series of studies about systemic risk. The purpose is to prevent, control and reduce the occurrence of systemic risk, and then guarantee the healthy and sustainable development of the global economy by the ways of identifying the source of systemic risk and the transmission mechanism. The thesis wants to research the systemic risk which is caused by the tight connection between financial institutions, namely the risk contagion effects.The thesis uses the method of combining granger causality tests and CoVaR based on quantile regression. It researches the transmission direction of systemic risk by granger causality test and the degree of systemic risk between banks by CoVaR. The thesis further measures the degree of financial linkages between banks using the method of CoVaR, and identifies the factor which affects the degree of financial linkages in the balance sheet. We analyze the sample of the listed banks in mainland China and Hong Kong to compare the differences between them.The empirical conclusions can be arrived as followed:(1) In mainland China, the banks which have large asset scale and high level of profits have a better ability to resist risk of the banking system as a whole; parts of the banks which have flexible mode of operation and strong competitiveness have a better ability to resist risk of the banking system than state-owned commercial banks; the larger scale banks have a larger risk spillover effect. In Hong Kong, the smaller scale banks have a lower risk spillover effect, and the small scale banks have a better ability to resist risk when the banking system are in trouble.(2) In mainland China, peer banks’debt is an important factor to increase the△CoVaR of impacted banks. Another influential index is interbank and other financial institutions’deposits. It has opposite influence on banks which are listed in mainland China and Hong Kong. In mainland China, common equity’s regression coefficient is positive and significant. Each impacted bank’s△CoVaR is influenced by different indicators in the balance sheet, and the degree is different.