The Impact Of Leverage On Systemic Risk

The outbreak of the subprime crisis in the United States with its wide range of radiation and bad social impact has attracted the attention of all walks of life.The study found that systemic risk,known as infectivity,played a crucial role.Covid-19 in 2020 spread globally and also affected the economies of various countries.Three historic circuit breakers occurred in the us stock market,increasing the possibility of a global financial crisis.As an industry with high risk of systemic risk,Banks are more destructive and infectious after the crisis.High leverage is an important feature of banking business,the basis of bank profits,and a common problem in China's banking industry and even the world's banking industry.Considering the need to fight against the epidemic and stabilize the growth,in-depth research on the leverage ratio of the financial sector banking sector is particularly important at present.At the same time,the continuous outbreak of systemic risks in Banks also reflects the shortcomings of micro-prudential policies,so the macro-prudential monetary policy-based supervision that can scientifically prevent systemic risks has become one of the focuses of current supervision.The report to the 19 th national congress of the communist party of China pointed out that we should improve the "dual pillar" regulatory framework for monetary policy and macro-prudential policy,improve overall supervision of the financial system,and ensure that no systemic financial risks occur."Double pillar" became an important means of regulating the macro financial of the central bank policy,for the central bank should combine the actual situation of the financial system in China,for the cause of systemic risk,overflow,and positive and effective to protect against infection,scientific and sound to build and implement suitable for the situation of China "double pillar" policy framework is the foundation of China and the high quality steady economic growth.The fourth plenary session of the 19 th central committee of the communist party of China(CPC)held on October 28,2019 still takes preventing and defusing systemic risks as an important part of current governance and an important measure to maintain financial stability.Therefore,this paper takes the data of 52 commercial Banks in China from 2013 to 2018 as the research sample to establish the panel data model,and meanwhile studies the economic cycle into the same framework of leverage and systemic risk of commercial Banks.In this paper,the Basel III tier-one capital divided by risk-weighted assets on and off the table in bankscope database is used as the leverage ratio indicator of commercial Banks,the per capita GDP growth rate is used as the economic cycle indicator after corresponding transformation,and the bank's bankruptcy risk Zscore is used as the measurement indicator of the bank's systemic risk.Four conclusions are drawn:First,increased leverage in the financial sector will exacerbate the level of systemic risk in Banks.Second,in the economic period,the increase of leverage has a small impact on systemic risk,while in the economic period,the increase of leverage has a greater impact on systemic risk.Third,the leverage ratio of Banks of different sizes has different impacts on the systemic risk of Banks.Specifically,the leverage ratio of the five state-owned Banks has a more significant impact on the systemic risk,followed by joint-stock commercial Banks,and the leverage ratio of urban commercial Banks has the least significant impact on the systemic risk.Among the influences of leverage ratio and economic cycle on systemic risk,the five state-owned Banks are the most significant,the joint-stock commercial Banks are the second,and the city commercial Banks are the least significant.Fourth,the leverage ratio of Banks in different regions has different impacts on the systemic risk of Banks.Specifically,the leverage ratio of Banks in the eastern region has a more significant impact on the systemic risk,followed by that of Banks in the central region,and the least significant impact on the systemic risk of Banks in the western region.The cross term of leverage ratio and economic cycle has the most significant impact on systemic risk in the eastern region,followed by the central region,and the western region has the least significant impact.