The Construction Of China 's Financial Stability Index System

Financial sector stability is related to the political, economic and social stability. Because of the frequently outbreak the financial crisis, financial stability issues once again on the attention of the world. June 2011,IMF evaluated China’s financial stability for the first time, stressing that the government of China needs to establish financial stability assessment system as soon as possible. Presently the studies of China’s financial stability assessment are putting their focus on qualitative analysis, and the quantitative studies are using bank or financial vulnerability index as the agency variables of financial stability, so they can evaluate the financial stability. There is no overall assessment of our financial stability. So it’s necessary to build up the financial stability assessment system of China.In this paper, I first theoretically summarized the theory of financial stability mechanisms. With the development and innovation of finance, the connotation of financial stability and the features of financial stability will be reconfirmed. I then summarized a list of factors that will influence financial stability- macroeconomic and financial factors, internal factors of financial system and the international financial environment, and I explained the mechanism of these factors effect of financial stability. Of course I first introduce this from the theory vision. In the empirical part, I selected three aspects of factors through reading the previous researches and considering the availability of data. They are the macro economic and financial factors, internal factors of financial system, and the international financial environment factors. Then I constructed the index system which can keep up with modern financial development of 21 indicators. By using the method of factor analysis, I clustered 21 indexes into 6 categories. And they respectively are the international financial environment impact factor category, bank subsystem operation category, monetary and financial market risk factors relevant category, the macro economy relevant category, capital market subsystem risk relevant category, and category closely related to the fiscal risk. We found that the factors that took the largest proportion are the international financial environment impact factors and it accounted for 33.06%. After comparing many evaluation methods, I selected the BP neural network method for assessment of early warning. By training of neural network constructed by using 1997 to 2012 data, I obtained network that can warning for the reality of China, then I put 2013 data into it, I got the conclusion. In 2014, our country’s financial environment overall is in a relatively stable state.