Correlation networks and risk spillovers within financial institutions contribute to the generation and dissemination of systemic risk. In this paper, a risk correlation network is constructed among Chinese banks employing the maximum entropy method, which simulates the individual risks of banks in the presence of exogenous shocks, the contagious risks, and total systemic risk through the effect of network spillovers, and analyzes its influencing factors. The results show that there is an increasingly rising trend in the overall systemic risk of China’s banking industry, and that the value of systemic risk is relatively large. From the perspective of the composition of banking systemic risk, individual risk accounts for a large proportion, about 70%, which is the main source of banking systemic risk, among which China’s state-owned commercial banks are the largest source. The contagious risk of banks accounts for about 30%. Furthermore, the contagious risk contribution of various banks is basically negatively correlated with their scale. The smallest urban commercial bank in the banking industry contributes at least 50% of the contagion risk, while the state-owned commercial bank, which accounts for about 40% of the total assets of the banking industry, only contributes less than 30% of the contagion risk.
ABSTRACT
PUBLICATION RECORD
- Publication year
2022
- Venue
Syst.
- Publication date
2022-02-08
- Fields of study
Business, Economics, Computer Science
- Identifiers
- External record
- Source metadata
Semantic Scholar
CITATION MAP
EXTRACTION MAP
CLAIMS
CONCEPTS
- bank scale
The size of a bank, reflected in its relative assets or organizational scale in the comparison of contagion contributions.
Aliases: bank size
- chinese banking industry
The set of banks operating in China that forms the empirical setting for the network risk analysis.
Aliases: China's banking industry, China banking industry
- contagious risk
The portion of bank risk generated through spillovers from other banks in the network.
Aliases: contagion risk, spillover risk
- individual risk
The portion of bank risk attributed to a bank's own exposure under exogenous shocks in the network setting.
Aliases: idiosyncratic risk
- maximum entropy method
A maximum-entropy-based construction approach used to infer the bank risk network from limited constraints.
Aliases: maximum entropy
- risk correlation network
A network representation of interbank risk linkages used to capture how risk is connected across Chinese banks.
Aliases: risk network, correlation network
- state-owned commercial bank
A large Chinese commercial bank with state ownership used as a bank category in the risk contribution comparison.
Aliases: state-owned bank
- total systemic risk
The aggregate systemic risk measure combining direct bank risk and network-induced spillover risk.
Aliases: systemic risk
- urban commercial bank
A smaller locally oriented commercial bank category included in the comparison of contagion risk contributions.
Aliases: city commercial bank
REFERENCES
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