Studies On Identification And Regulatory Of Systemically Important Banks

The2008financial crisis caused the global financial sector a huge impact.As thecore of the financial system, the banking industry could not be spared.how to carry outeffective supervision of the banking system has become the focus of attention. In viewof the case, the international regulatory authorities firstly proposed the concept ofsystemically important banks, they try to impose more strict regulation to systemicallyimportant banks in order to guard against systemic risk,and thus enhance the ability towithstand risks of banking indusrty. The Basel Committee notes that the systemicallyimportant bank is the bank that Once collapses,the entire financial system even the realeconomy will suffer the huge losses. Systemically important banks’s important positiondecides they will become the focus of supervision.Before carrying out effectivesupervision, we should identify which banks are systemically important banks.This paper firstly introduces the international primary method of systemic riskmeasure, combined with the Basel Committee’s assessment of global systemicallyimportant banks requirements.Then choose the China’s listed banks as the researchobject in order to identify China systemically important banks. Banking systemcomposed by a number of banks,and they become close links because of their businesscontacts. Once a bank in trouble or suffering from shock,it can not only impact on itselfdirectly,but also shock the entire banking system.This is the reason why a bank producerisk spillover. This paper takes two different methods,one named condition value atrisk(CoVaR),which is used for studying spillover of financial institutions.Through thismethod,it takes China’s listed banks stock returns data to quantitatively analyse theimpact of individual bank to the entire banking system, and measures the risk overflowbetween banks. By comparing the banks’ risk contribution rate,we can identify Chinasystemically important banks.The other method named index system. The index systeminclude indicators of size, relevance, substitutability, complexity, and social trust.In thismethod,we can identify China systemically important banks on scores by establishingthe evaluation index system.In this paper, Although some banks in the two methods will be some differences inrank order,we can find that the results are basically the same. Systemic importance ofstate-owned banks is higher than the joint-stock commercial banks, and the joint-stockcommercial banks is higher than city commercial banks.We can make a conclusion thatBank of China, China Construction Bank, Industrial and Commercial Bank of China and Agricultural Bank of China are China systemically important banks. The study alsofound that the method of CoVaR by using market data focus on the banks’ risk spilloveranalysis, and the method of index system which is based on financial data can reflect theoperating status of the listed banks and the degree of association between banks.Therefore, the combination use of the two identification methods will identify the Chinasystemically important banks accurately. This is also consistent approach advocated bythe Basel Committee:when identify systemically important banks, regulatory authoritiesshould not only establish index system but also research other matching method.Finally, this paper puts forward countermeasures to supervise the systemicallyimportant banks based on the identification result and the actual situation of China’sbanking system.