Measurement And Regulation On Systemic Risk In The Chinese Banking Industry

The reason for thelatest financial crises are the excessive financial innovation and the outbreak of the accumulation of systemic risk due to loose regulatory policy.After the crisis, people are aware of the necessity of systemic regulation.Systemic risk is strongly infective and not easy to discover. It can spread risk largely through the system mechanism by the domino type. It can also accumulate in economic upswing and outbreak in the economic downturn interval due to the pro-cyclical characteristics of financial institutions. In addition, regulators found thatthe single micro prudential supervision of financial institutions cannot control the occurrence of systemic risk. So regulators all over the worldfocus on the framework of macro-prudential regulation and policy to deal with systemic risk. China did not suffer from the financial crisis because of our financial market didn’t highly open to the outside world. But as the deeper of the interest rate marketization and the cooperation with international financial institutions, it will enhance the correlation with global financial system and contain a greater systemic risk.The assets focused on the banking industry along with serious homogeneity in our country, itwill form a pro-cyclical correlation with the system and increase the probability of the occurrence of systemic risk. Therefore, it plays a vital role for financial environment stability to establish macro-prudential regulations for banking systemic risk.This essay uses the combination of theoretical and empirical methods to study systemic risk. First of all, according to domestic and foreign researches, the author clarifiesthe meaning, characteristics, the cause of the bank systemic risk and regulatory approach.Then measuring the bank systemic riskfrom cross section dimension and time dimension by theoretical analysis and empirical measure: in the cross section dimension, the author clarifiesthe system relevance principle of systemic risk and diffusion in the bank field, and measures the risk premium that the listed bank infect to other bank’s; In the time dimension, theoretically analyzes the pro-cyclical of the bank capital buffers and the credit behavior and measures the degree to which the two pro-cyclical. Finally, based on the reality of China’s banking industry, the author suggests build macro-prudential regulation policy to prevent systemic risk.