Systemic Risk Measurement Of Chinese Commercial Banks

The financial crisis happened in 2007 has exposed the fragility of the banking system. The extreme event of individual financial institutions can quickly spread to other financial institutions through the mechanism of infection, which led to systemic financial risk. After the crisis, the supervision of systemically important financial institutions become a vital topic in financial regulation. Commercial banks are the main part of China’s financial system.In the past credit easing, Chinese commercial banks involved in real estate and local government debt.The banks also turn a large number of credit assets into interbank assets to avoid regulation, thus exacerbating systemic risk of China’s commercial banks. It is important to measure the systemic risk of Chinese commercial banks and enhance the systemic risk management in such a context.In this paper, we combined Co Va R method with DCC-GARCH method to measure the systemic risk of China’s commercial banks. Bank of China, China Merchants Bank, Industrial Bank and Nanjing Bank are selected for empirical research. At the same time, considering the possible presence of a structural break, we introduced MRS on the basis of DCC-GARCH model to analyze the structural changes. The empirical results show that the correlation between China’s banking institutions and the banking system is dynamic and the systemic risk contribution of China Merchants Bank and Industrial Bank is higher than the Bank of China and Bank of Nanjing. From the model with MRS we also found the existence of two status in the correlation between China’s commercial banks and banking systems —— high correlation and low correlation. The high correlation is the dominance status.