Research On The Systemic Risk Of Security Industry In China

After the outbreak of the U.S. Subprime Crisis and the European Debt Crisis, peplepay more attention to Systemic risk. How does systemic risk form, which industry itexists in and how to guard against it is a difficult problem in front of academia andpractice. Most economists put the research emphasis on the banking industry, because ofthe systemic risk of commercial bank has a strong infectivity. Once the risk outbreak，it will cause huge losses. But we should also see that the securities industry has longbeen a high-risk industry, despite the financial crisis had not influence on thecomposition of the security industry in China, but along with the increasing openness ofour country securities company, the expansion of the scope of business and more andmore derivatives positions, vulnerability of the securities firm will emerge, so it isnecessary to study the systemic risk of the security industry in China.In this paper, I process the comparative analysis of the systemic risk and the threetraditional risks faced by individual financial institutions, then point out that there areboth connection and difference between them, three major traditional risks are one ofthe causes of systemic risk, however, systemic risk has its unique characteristics:macroscopic, conductivity and asymmetry between risk and income. The harm ofsystemic risk is huge. This article also carries on the comparative analysis of assets andliabilities structure between the securities and banking industry, points out that unlikethe banking systemic risk, systemic risk of the securities industry is increasinglyhighlight because of the increasing internationalization of securities companies, theexpansion of the financial group scale, and the increasing holding positions of financialderivatives.In order to quantify the size of the systemic risk in the securities industry in ourcountry, this paper uses the CoVaR method which based on the GARCH model andcarries on the empirical analysis of the13securities company systemic risk contribution.The empirical results show that Xingye securities, Huatai securities, Guangda securities,Zhongxin securities and Guangfa securities suffer more systemic risk than the rest of theeight companies. The main reason is that the five securities companies have morerelationship with other financial institutions on business or money.On the basis of theoretical research and empirical analysis, this paper finally puts forward policy suggestions on the systemic risk supervision of the security industry inChina. China’s securities regulatory authorities should base on its actual situation, fullydraw lessons from the successful experience of foreign mature securities companies,start from internal and external risk supervision, establish perfect internal risk earlywarning mechanism and internal risk supervision system, and apply the regulationmethod in Basel to securities companies. Risk regulatory authorities also can demandsecurities companies to establish a net capital regulation system and withdrawingappropriate countercyclical capital buffer at the appropriate time to avoid securities firmsuffer from the harm of the systemic risk, only in this way can securities firm’s lossreduce to a minimum level.