The Research On Identification Of Chinese Systemically Important Banks

The concept of Systemically Important Banks was officially on the agenda after the2008Financial Crisis. The Financial Stability Board, Basel Committee on Banking Supervision and International Monetary Fund three world’s professional financial regulators describe the key function of the SIBs in the financial market in the aspects of size, substitutability and interconnectedness and the trigger effect when one of them breaks down.SIBs is the bank with great size, complicated business and tight interconnectedness with other banks which plays an vital role in the financial market within a certain time and area and whose failure will highly possibly cause tremendous damages to both financial system and the real economy. So the identification of the SIBs is essential when we take the financial stability into consideration. As the concept of the SIBs is fresh, the assessment method of the SIBs has not come to an agreement. Indicator Assessment and Market Assessment are the most popular ones.At present, the Chinese regulators adopt the Indicator Assessment using indicators like size to judge the SIBs. This method is easy and intuitive but with obvious drawbacks which is subjective and unquantifiable. In this way, this thesis brings the Market Assessment in to build the Systemic Importance Index along with the indicators of size, substitutability, interconnectedness, complexity and confidence to build the final Weighted Systemic Importance Index. The structure of SII is based on the Multivariate Extreme Value theory which can well describe the tail risks. The mathematical method adopted is the Stable Tail Dependence Function, a kind of copula functions.The daily stock yield of Chinese listed banks is taken to do the empirical analysis. Results show that the Chinese listed banks present3levels. The traditional stated-owned banks are of the highest systemic importance while the city commercial banks are of the lowest. The systemic importance of commercial banks is in between. The systemic importance of the whole bank industry rises form crisis time to recovery time.In the end this thesis contributes some policy recommendations. First, much attention should be paid to the high systemic risks of the Chinese bank industry. Second, point a regulator especially in charge of the regulation of systemic risks and tread the SIBs according to their characteristics. Third, the identification of the SIBs should with an eye to multi-angles and in a dynamic sequence. What’s more, an improving environment for the quantitative assessment methodology is badly needed.