Identification Of Systematically Important Banks,interbank Liquidity And Systemic Risk Of China’s Banking Industry

With the advancement of financial integration,financial institutions around the world have established highly related networks through joint investment,cross shareholding and other ways.While providing asset liquidity convenience,the network has also provided a medium and infectious route for the spread of crisis and risk.It has been a hot spot to conduct research on preventing financial systemic risk,especially in the banking industry.How to identify and effectively supervise domestic systematically important banks(D-SIBs)is the key to conduct macro prudential regulation.The interbank lending market is the most important way for interbank asset circulation.By studying the topological structure of interbank lending network and analyzing its relationship with systemic risk on this basis,we can provide suggestions on the prevention and supervision of systemic risk in the banking industry.At present,in terms of the evaluation of SIBs and financial risk measurement,most of the studies focus on state-owned or large commercial banks,without considering more banks with more types.At the same time,although there are many academic studies on the correlation between the connectivity and concentration of the interbank network and systemic risk,and the indicators used to describe the network characteristics are also sufficient,there are few studies on interbank liquidity and systemic risk,and there are no widely recognized quantitative indicators to measure interbank liquidity.In addition,most of the existing literatures at home and abroad study risk contagion based on static network structure,and assume that the bank’s asset liability structure is also fixed,without in-depth discussion on the important features of the dynamic evolution of systemic risk.Therefore,China’s interbank lending network is firstly constructed by the minimum density method,and synthetically uses network analysis method and comprehensive index method to identify SIBs and different types of important banks and conduct asset loss stress test by analyzing the connectivity,degree,centrality and other relevant topological indicators of the network.Then,considering the basic default and contagion default formed through interbank lending network,a dynamic systemic risk measurement model of China’s banking industry is constructed by adding time-varying factors to the bank default clearing and payment mechanism.At the same time,LMI is defined as a measure of interbank liquidity.Through the analysis of liquidity propensity,damage and sensitivity to asset losses,the relationship between the liquidity of interbank networks and systemic risk is studied.The conclusions drawn include two parts.The first part focuses on the identification of different types of SIBs and asset loss stress test.The conclusions include: the role of capital outflows in the interbank market of China’s large banks has weakened while the role of capital inflows has strengthened;Network analysis method and comprehensive index method are used to obtain China’s D-SIBs and different types of important banks,among which D-SIBs include 6 state-owned banks,9joint-stock banks and 4 urban banks;The SIBs of state-owned,joint-stock and urban banks have a higher impact on systemic risk than that of the rural banks.However,in general,when the asset loss ratio of a single SIB reaches 5%-8.2%,it can cause an increase in systemic risk.Therefore,special attention should be paid to the risk prevention of SIBs.The second part focuses on the performance of interbank liquidity and its impact on systemic risk.The conclusions include: in the interbank lending network from 2015 to 2019,policy banks,state-owned banks and rural banks have always been in the supply side of liquidity,while urban banks have always been in the demand side of liquidity.In 2019,the liquidity was the most abundant,and in 2017,the liquidity was the most lacking;Interbank liquidity propensity is related to whether or not it fails.Banks on the liquidity supply side tend not to fail;The global impact of asset loss reaching 0.10 can cause more than 95%of banks to fail.With the increase of global asset loss,interbank liquidity is also decreasing;From the perspective of the damage of asset loss to systemic risk,the years with insufficient liquidity are higher than those with sufficient liquidity,and the banks with liquidity supply tendency are higher than those with liquidity demand tendency.From the perspective of sensitivity to asset loss,the years with insufficient liquidity are higher than those with sufficient liquidity,and the banks with liquidity supply tendency are lower than those with liquidity demand tendency.The above conclusions can provide reference for systemic risk supervision and crisis response.There are three innovations in this paper.Firstly,the minimum density method is used to estimate China’s interbank network,and basic default and contagion default are comprehensively considered.Time varying factors are added to the bank default clearing and payment mechanism to describe the dynamic evolution process of interbank lending network and systemic risk;Secondly,D-SIBs are estimated from the topological properties of interbank lending network,and LMI is defined as the interbank liquidity measurement index;Thirdly,this paper collects data on the assets and liabilities of 182 banks from 2015 to 2019,providing more reliable data support for the construction of China’s inter-bank network,the identification of SIBs,and the research on the relationship between interbank liquidity and systemic risk.