An Empirical Examination Of Systemic Risk In The China’s Interbank Market Based On The Matrix Method

The U.S. subprime mortgage crisis had hit the global financial system and thereal economy in2007.Thus,regulators began to re-examine the soundness of thefinancial system,the focus of the regulatory shift from the previous micro tomacro-prudential supervision perspective, they have more focus on how to protect thesafety of the entire financial system, especially protect the banking system. Due to thehigh credit association between banks, the failure of individual bank will lead to aseries of bankrupt or bank assets will have some degree of loss that could eventuallyspread to the entire financial system. So after the subprime crisis, some countriesbegan attention interbank contagion risk assessment and regulation.This paper based on the principle of matrix method,using the data of each listedbanks in2011, without considering the role of the financial safety net to simulate thethe risk of infection of inter-bank market.Current status of the bank industry isreflected in the four main subjects of the banks’ balance sheets, which are due frombanks, placements with banks, deposits by banks, interbank,according to thedifferent trading partners and trading areas, each subject are divided into the territory(outside) the industry, domestic (foreign) non-bank financial institutions, foursub-accounts.Firstly, after removing the data of domestic non-bank financialinstitutions and foreign interbank, the paper analog the inter-bank market transactionsmatrix, secondly, taking into account the non-bank financial institutions theproportion of interbank transactions rising, the lending to non-bank financialinstitutions data, including estimates of infection risk in the interbank market again,study results showed that:(1) The degree of systemic risk of infection not only associated with liquidity,but also associated with θ. the higher θ, the more sheer scope of systemic risk and theseriously of the consequence; matrix model simulations Bank (2) When theImproved matrix model simulate the infection risk of the interbank lending market,the five major state-owned Banks and Industrial Bank have become a risk infectionsource, but the infection risk before improvement only Industrial and CommercialBank of China Limited,(3) when θ=1, the collapse of the Bank of China will causeinsolvent of construction Bank, while construction Bank collapse also caused thecollapse of the Bank of China, it is describe that Bank of China and the constructioninterbank have close contacts; collapse of ICBC will trigger the collapse of the Bank of China, but the collapse of the Bank of China and did not make ICBCcollapse, indicating a strong anti-risk ability ICBC in interbank market;(4) In thejoint-stock commercial banks, the risk-resisting ability of CMB is the strongest...