The Systemic Risk’s Spillover Regulation Of Commercial Banks In China

Since the 2008 financial crisis, as the large, systemically important financial institutions, for example Lehman Brothers, Merrill Lynch, fell into crisis, the Wall Street financial collapsed and the booming transmission and overflow of the financial system’s systemic risk, rapidly led to the global financial turmoil and the entity economic malaise. In this crisis, systemic risk’s fast overflow and transmission speed and causing great harm aroused the attention of the financial community and the regulators. Though with some harmful impact, the banking industry in China hadn’t been influenced directly and devastatingly. As fully market-oriented and highly globalized has always been the goal of financial reform in China, we should save for a rainy day and supervise the systemic risk.This paper locates in the spatial dimension(i.e. systemically important dimension) to discuss the systemic risk overflow and regulation. By the theoretical induction,we know the systemic risk and sum up foreign regulatory experience. In order to confirm the feasibility of the experience in China, we do a quantile regression analysis of 14 listed commercial banks’ stock weekly return rate based on the technology of CoVaR. We set an assumption of when the whole bank fall in crisis, analysis the single bank’s systemic risk spillover effects and find that the BCM, CCB, HXB, ICBC and BOC have strong ability to resist risk, even have a positive spillover effect on the bank industry. They play an active role in preventing the expansion of the overall banking crisis. Weighing the % CoVaR and the assets, we obtain that BCM, CCB, ICBC and BOC are the systemically important banks(SIBs) in China; We set another assumption of when a single bank is in crisis, analysis its systemic risk spillover effects on overall bank and find that during the crisis, the SIBs and commercial banks which have rich business structure, strong asset correlation with other banks and flexible operation modes, such as the HXB, have the higher %CoVaR. They both should be regulated more strictly. In addition, the empirical analysis also concludes that the unconditional VaR(value at risk) and the scale shares no certain correlation with the systemic risk contribution and confirms the shortcomings of VaR to CoVaR which underestimates the risk. Based on these things, we put forward policy recommendations for Chinese commercial banks’ systemic risk spillover macro-prudential regulation.