The Impact Of The "Two Pillars" Policy On The Systematic Risk Of China’s Banks

The financial crisis broke out in 2008.It has had a serious influence on the financial system.A lot of departments have realized preventing and resolving systemic risks is urgent.At the same time,governments have also found that a single monetary policy can not reduce systemic risks,maintain system stability,and neither can the micro-pprudential supervision policy.It is urgent to build and improve the macro prudential policy system.In order to effectively mitigate the adverse effects of the financial crisis,China has actively explored and practiced,combined with the history of financial development and regulatory experience,formulated a number of macro-policy frameworks.In 2017,it clearly proposed to establish and improve the "dual pillar" policy.Monetary policy need protect economic stability,macro-prudential policy need protect financial stability,and the "dual pillar" policy combines the two policies to better achieve China’s economic and financial stability.Since then,the "dual pillar" regulatory framework has come into people’s view.This paper aims to explore the supplement of macro-prudential policy to monetary policy,and it also want to verify that the dual-pillar policy is effective.For this reason,we found that the SRISK index is more suitable for China’s actual macroeconomic trend,and its evaluation results are more reliable.Then,it analyzes the theoretical mechanism that the impact of macro-prudential policy and monetary policy on the banks’ systemic risk,and finds that using monetary policy tools alone cannot protect banking system’s stability effectively,and then puts forward the necessity of dual-pillar policy and its impact mechanism on the systemic risk of banks.Finally,based on the quarterly frequency micro-panel data of 42 A-share listed banks in China from 2013 to 2021,this essay use the system GMM method to analyze the influence of monetary policy and macro-prudential policy on the banks’ systemic risk,and explore the complementary role of macro-prudential policy,so as to verify the effectiveness of the dual-pillar regulatory framework,which can curb banks’ systemic risk and protect the the banking industry’s stability.Research findings:(1)Through SRISK indicators,among A-share listed banks,the six large state-owned banks have a wide range of business and are more closely connected with other banks.They have the highest contribution to systemic risk,so they have the highest status and influence in China’s banking system.(2)Tight monetary policy and macro-prudential policy can significantly reduce the systemic financial risk of commercial banks,while loose monetary policy and macro-prudential policy will promote the accumulation of systemic financial risk of commercial banks,and then exacerbate the financial crisis.(3)Monetary policy and macro-prudential policy working together can restrain the expansion of loose monetary policy on the systemic financial risk of banks effectively.Therefore,when adopting loose monetary policy,prudent formulation of macro-prudential policy can weaken the adverse effects of monetary policy.(4)Banks’ own factors and macroeconomic operation can also effectively affect their contribution to systemic financial risk,and the impact of the dual-pillar policy on banks with different scales,different efficiency,different profitability,different capital adequacy ratios and different deposit/loan ratios is heterogeneous.(5)Macroprudential policy can supplement the implementation effect of monetary policy by influencing credit expansion and non-interest income,and reduce the systemic financial risk of the banking system on the basis of maintaining stable economic growth.