Research On The Risk Contagion Effect Based On Chinese Banks In The Interbank Market With Matrix Method

Banks occupy an unshakable position in China's financial system,and support the economy to run smoothly.The stability of the banking industry directly relates to China's economic fate.Risks and management of banks accompany each other,with the increasing degree of financialization,Whether the bank management is successful or not is not only the issue of several banks,but will also exerts influence on other banks,who are conducting transactions with them.Since the US subprime crisis has devastated global financial system and economic entity,regulators began to re-examine the robustness of the financial system,they transfer the regulatory focus from the previous micro-prudential supervision to macro-prudential supervision,and pay more attention to how to protect the security of the whole financial system,especially the security of the banking system.Due to the high degree of credit associations between banks,the bankruptcy of one bank could trigger a chain of bankruptcies or a certain degree of asset loss of other banks,which could eventually affect the whole financial system.Therefore,following the sub-prime crisis,various countries began to pay close attention to the assessment and the regulation of the inter-bank risk contagion effects.This paper will analyze the contagion effects of banks' risk arising from mutual borrowing from the perspective of the inter-bank market.Based on the interpretation of the inter-bank market risks contagion documents,first,this paper expounds the definition,structure and contagious path of inter-bank market risks.Then,this paper uses descriptive statistical analysis to analyze China's inter-bank market's membership and current development situation,etc.At last this paper incorporates the same series of new business into the inter-bank lending data,selects 16 banks as the research object,constructs the index system,uses matrix analysis method,with the help of Matlab data analysis platform to obtain the matrix of risk position,and then simulates the influence of one bank's bankruptcy on other banks,This paper chooses the Bank of China,Industrial and Commercial Bank of China,China Construction Bank and the Agricultural Bank of China to analyze the influence of different asset losses rate on other banks.The main conclusions of this paper are as follows:(1)The risk contagion between banks is related to the loss given default,the loss given default determines whether the risk contagion occurs and the magnitude of the default loss.(2)The higher the capital adequacy ratio of whole banks,the smaller the bank's contagion loss;(3)During the risk contagion process,the importance of banking system is related to its position in inter-bank market;(4)The degree of bank risks is connected with the inter-bank market structure.On this grounds,this paper takes an innovative consideration on the influence of new inter-bank businesses,and puts forward suggestions on how to reduce inter-bank market risks in three aspects: how to prevent the inter-bank market risk,how to control during the risk contagion,and how to monitor after risks.