The Reassessment Of Chinese Systemically Important Banks

In the context of the global financial crisis, the inter-related problems of financial institutions contagion caused great concern in all countries. Among them, the inter-bank lending, etc. due to the similarity of asset structure and related party transactions is one of the important causes of the crisis spread. Thus assessing the systemically importance of the banks become more urgent and important, so that regulators can be targeted, targeted to different importance for banks to take a different approach and regulatory constraints, to focus on the role of risk prevention.First to get the importance ratings of 14 listed banks in China using the indicator-based approach so that we can identify four systemically important banks initially. On the basis of that, we use Copula function to quantitatively calculate the change of the tail correlation coefficient between banks before and after the crisis. Then we determined the seven systemically important banks in China. To explain the differences between the two approaches above, we carry out a comprehensive re-assessment combining industry financial variables and capital market price variables. We improved the indicator-based approach model by using the tail correlation coefficient as relevance indicator, and obtained the similar order. This is from one side to verify that the scale is not a unique indicator to evaluate the bank’s systemically importance, and relevance seems to be more important in assessing the status of the bank’s systemic importance. Besides, we evaluated the bank’s systemically importance using the latest data, and found that the indicator-based approach can also present an exactly result. It indicated that during the financial crisis, relevance between banks plays the leading role, so the Copula approach may offer an appropriate result; and after the crisis, relevance becomes weaker, so that the indicator-based approach can also make sense. Finally, we proposed some suggestions on the regulatory aspects according to the actual situation of China’s banking industry, including the focus on capital market data monitoring and different supervision on banks with different levels of importance. In particular, we hope regulators pay more attention to and strengthen the research for the evaluation of systemically important banks, and continuously improve assessment methods, so that we can prevent financial crisis in advance.