Internal Vulnerability?Economic States And Systemic Risk In The Banking Sector

The lessons of the global financial crisis remind us that in the process of financial supervision,we should promptly identify the vulnerabilities in the financial system,strengthen the prediction and analysis of structural changes within and outside the banking system.Combining the current structural changes in the domestic and international economic situation,in-depth study of the formation mechanism of systemic risk under different economic conditions,and the establishment of a model more in line with the interaction between macroeconomic and financial systems has become a major issue facing national regulatory authorities.Banks have always played a leading role in the financial system.The risk situation of the banking sector is related to the stability of the entire financial system and the growth of the real economy.Stabilizing the risk of the banking sector is the most important part of preventing systemic risk of financial system.According to the logic of understanding,analyzing and measuring and preventing systemic risks,the article uses a combination of theory and empirical methods to study the relationship between internal vulnerability,economic status and systemic risk in the banking sector.From the perspective of the internal and external formation of systemic risk in the banking sector,this paper studies the two channels of influence of the internal vulnerability and economic states of the banking sector on the systemic risk of the banking sector by constructing a systemic risk model including the internal vulnerability and economic states of the banking sector.This paper further analyzes the structural changes of the banking sector formation mechanism under different economic conditions by introducing state variables.Then,based on the contingent claims analysis framework,the Markov process is introduced to decompose and measure the internal vulnerability risk of the banking sector and the external economic state.This paper selects the listed banking sector in China from October 2007 to September 2018 as a sample to study the impact of internal vulnerability and economic states on systemic risks in the banking sector.The main conclusions of this paper are as follows: First,internal vulnerability and economic states are two important sources of risk in the formation of systemic risk in the banking sector.The internal vulnerability of the banking sector and the economic state through the asset value return rate and asset volatility channel affect the formation of systemic risks.Second,there are differences in the systemic risk formation mechanisms under different economic conditions.There are structural changes in the internal vulnerability and economic state's impact on systemic risks.Third,systemic risk can be broken down into the impact of internal vulnerability risks and the impact of external economic conditions.The trend of systemic risk in the banking sector is mainly determined by internal vulnerabilities.The higher the internal vulnerability of the banking sector,the greater the risk of internal vulnerability.Fourth,the economic state plays a similar role as a multiplier for systemic risks.The downward trend of economic growth will aggravate the deterioration of systemic risks in the banking sector,and the upward state of economic growth can stabilize the risk situation of the banking sector.The magnifying effect of the economic state on systemic risk is asymmetrical,and the economic state has a more pronounced effect on the systemic risk than the systemic risk.Moreover,the higher the internal vulnerability risk of the banking sector,the greater the impact of the economic state on systemic risk,and the less the impact of the economic state on systemic risk when the banking sector's own vulnerability is improved.In macroprudential supervision,the supervisory department must not only control the internal vulnerability of the banking sector,but also pay attention to the structural changes of the external economic environment and the relationship between the internal vulnerability of the banking sector and the external economic environment.Regulators also need to intervene in the relationship between the banking sector and the corporate sector.Forward-looking counter-cyclical supervision mechanism should be established to achieve effective management of systemic risk.