| As an important component of the financial system, banking plays a role which collect capital resources and then allocate them. Mutual business contacts between banks formed complex debt-creditor relationship so that it is exposed to the presence of large risk positions, which means that the impact of individual bank failures will spread the infectious to entire banking system through interbank network. Therefore, it is crucial for the stability of financial system and risk prevention that study the problem of risk contagion in the interbank market. Except the channels of risk contagion the interbank network also is the main way to risk sharing. The interbank can improve the anti-risk ability and maintain system stability under risk sharing.This paper uses the financial data of 5 state-owned joint-stock commercial banks and 11 joint-stock commercial banks to study the interbank contagion and risk sharing. On the one hand, we build the interbank network by combining matrix method and threshold method of complex network theory and detect the changes of interbank market networks by using the measure of mutual information; on the other hand, we analyze the risk contagion effect in the interbank network at different loss rates and under the effect of risk sharing. The results show that the danger of risk contagion is normally confined to a limited number of relatively large banks, i.e., Bank of China, Industrial and Commercial Bank of China and Agricltural Bank. The effect of risk contagion is signigicantly reduces under the influence of risk sharing.The empirical results demonstrate that bank failures remain a possibility affecting a sizeable part of the banking system. It can improve the stability of the banking system according to risk sharing. Therefore, the regulator should launch a broad investigation of banks which could trigger risk contagion and other banks should work on the risk sharing initiative when a counterpart bank under attack. |
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