Research On Systematic Risk Spillover Of Commercial Banks

Based on the fact that multinational commercial banks have been repeatedly affected by external shocks in recent years,this paper explored the systemic risk spillover of commercial banks from the perspective of external shocks.Based on financial history events,this paper analyzed the impact of five external shocks on the systemic risk spillover and believed that commodity price,real estate price,exchange rate,interest rate and stock price could affect systemic risk spillover.Firstly,the increase of commodity price will reduce systemic risk spillover by improving the asset quality of banks.However,in long-term,the cost of downstream industries will increase deteriorating downstream industry solvency which will drive up the systemic risk spillover.Secondly,the short-term increase of real estate prices will also reduce the systematic risk of commercial banks by improving the quality of bank assets while the long-term increase will push up the spillover by worsening the downstream industry solvency.Thirdly,the exchange rate and interest rate do play a role in the systemic risk from many aspects,but the impact direction is uncertain,depending on the sensitivity of each industry and the structure of the assets of commercial banks.Forthly,stock prices can also have an impact.In the empirical test part,this paper first selected the CES method,COVAR method and CCA method to measure the systemic risk spillover.From the measurement results,three methods have similar importance ranking of bank.The top four state-owned commercial banks are most systemically important.However,the three methods do not agree on the time-varying measure of the level of spillover.Through the SVAR model,this paper found that the level of systemic risk was affected by external shocks,while the sensitivity and response of banks were different and the overall view depends on the asset structure of banks:1.The rise of commodity prices did not affect the systemic risk spillover level of banks.With the price increase firstly spreading to the manufacturing related industries to guarantee profits,risk spillover will decline in the beginning.After the price rise was transmitted to the downstream consumer industry,the impact of risk spillover would gradually disappeared.2.Due to the low ratio of bad loans in real estate industry,the increase of real estate prices did not reduce the systemic risk spillover However,because of the high debt ratio of real estate enterprises,with the rising prices,real estate enterprises want to continue to increase the leverage to buy land,increase the repayment pressure,leading to joint-stock banks,especially the risk spillover of real estate loans.For the banks with more non-performing loans,the rise of real estate prices will gradually reduce the non-performing loan ratio,the risk spillover level.3.the depreciation of the renminbi improves its business status by improving the export level of various industries,such as manufacturing,enhancing its repayment ability,reducing the systemic risk of commercial banks,resulting in the decline of systemic risk spillover in short-term commercial banks.The increase of current interest rate will increase the spillover of the systemic risk of commercial banks in the future,although some interest income accounts for higher banks will first decrease the systemic risk spillover due to income increase capital and liquidity,but with the increase of interest rate will increase the risk spillover level.4.for stock price shocks,the impulse response results show that the higher the stock price,the higher the level of systemic risk spillover in short-term commercial banks in the future.Based on the stock pledge assets to analyze the impact of stock price on risk spillover level is not comprehensive,the relationship between stock prices and commercial banks is not all included,and needs further analysis.Finally,this paper builded the BP neural network early warning system of spillover.And through the data learning and testing,it was found that the simulation learning ability of the system was strong,and the prediction accuracy was high.And in order to avoid the negative impact of external shocks,this paper proposed that commercial banks should integrate commodity prices and real estate prices into the scope of pressure testing and market risk regulation.Besides,commercial banks should establish early warning system to pay attention to the impact of external shock.