Research On The Impact Of Liquidity Creation On Banking Systemic Risk

Commercial banks are an important part of my country’s financial system.The banking industry is large in scale,high in complexity,and strong in correlation.It has an important influence in the financial system.Once a risk problem occurs,it is likely to spread rapidly,leading to the collapse of the entire financial system.In recent years,the level of liquidity creation of Chinese banks has been continuously rising,but there are also incidents such as "asset shortage" and "debt shortage",which affect my country’s real economy.It is very necessary to pay more attention to the indicator of liquidity creation to control the systemic risk of my country’s financial system.This thesis focuses on measuring the impact of the indicator of liquidity creation of banks on the systemic risk of my country’s banking industry through empirical methods.Firstly,we use the stock price data of 16 listed banks in China from the first quarter of2007 to the fourth quarter of 2021 to construct a systemic risk indicator,and decompose it into individual bank tail risk and system related risk.Use bank balance sheet data to construct liquidity creation indicators and decompose them into two levels: on-and off-balance sheet,assets and liabilities.Then,a fixed-effect panel model is used to explore the relationship between liquidity creation and systemic risk,and banks are grouped according to ownership and size to explore the heterogeneity of the relationship between the two.Secondly,in order to further explore the relationship between the two,the interaction terms of bank capital structure,profitability,business model and liquidity creation are introduced,and the moderating effect of bank characteristic variables is analyzed.Finally,the capital adequacy ratio and loan-to-deposit ratio are used as mediating variables to establish a mediation effect model to explore the transmission channel that liquidity creates affects systemic risk.The main conclusions are as follows:(1)Bank liquidity creation increases the bank’s systemic risk level.After decomposing the systemic risk,it is found that liquidity creation will increase the tail risk of the individual bank,but reduce the systemic correlation risk,and the impact on the individual tail risk is higher than that of the systemic correlation risk.(2)Non-state-owned banks and banks with smaller assets have a stronger positive correlation between liquidity creation and systemic risk than state-owned banks and banks with larger assets.The moderating effect of bank characteristic variables shows that the more stable the asset structure,the weaker the profitability,and the more non-traditional business model,will promote the positive relationship between liquidity creation and systemic risk.(3)Bank liquidity creation can increase the level of systemic risk through two channels: raising the capital adequacy ratio and reducing the loan-to-deposit ratio.