| It is well known that financial institutions can translate illiquid assets into highly liquid liabilities,namely maturity transformation function,which is the underlying reason that cause liquidity risk.Development of interbank business formed an intricate network of credit and debt,will undoubtedly provide a channel for liquidity risk contagion.Problems with a financial institution,will be transmitted through a variety of channels,such as bilateral exposure channel,asset price channels,information channels,etc.Financial institutions pay more and more attention on interbank business especially after 2007,when credit control intensified,interest rate marketization process accelerated,and financial disintermediation reinforced.In recent years,the development of interbank business shows the following characteristics:1.interbank business grow significantly,interbank assets/total banking assets increases year by year;2.resale of financial assets is a major component of interbank assets,between 36%-50%;3.interbank deposit is a major component of interbank liabilities,next is repurchase agreements;4.different types of financial institutions show differences during the development of interbank business;5.the majority of interbank borrowing is overnight money,which makes interbank liquidity risk spread fast;6.translate illiquid interbank assets into highly liquid interbank liabilities through business innovation.Flourishing interbank business hides huge risks: on the one hand,the maturity mismatch of interbank business from assets side to liabilities side enlarges liquidity risk;on the other hand,the complex trading patterns of interbank business elongate the contagion chain of liquidity risk,even lead to systemic liquidity risk.These are undoubtedly exacerbated the contagion of liquidity risk during banking.June 2013 "money shortage" event is the best example.In this context,strengthen the study of liquidity risk contagion during banking is particularly important.The relevant literature on the sort of interbank liquidity risk contagion issues were reviewed,then we points out the shortcomings and the way forward.Domestic-related research focuses on the connotation,causes and factors of liquidity risk,as well as interbank business,especially the "money shortage" event.The research on liquidity risk contagion during banking is relatively few,especially contagion channels and contagion processes.Overseas research starts earlier,however,more and more literature starts to study liquidity risk contagion during banking issues from the perspective of complex networks,but the majority is on insolvency contagion,and draw different conclusions.Conclusions from research abroad can not be used in China,the research results can not meet the need of improving the management of liquidity risk contagion in China.Based on this,this paper analyzes the process and channels of interbank liquidity risk contagion,studys the consequences of the liquidity risk contagion.Many of the world systems are presented in the form of network,studies show that banking systems are complex networks with small-world and scale-free characteristics.Complex networks theory studys the nature of the connection between large-scale nodes of the network from the statistical perspective.In recent years,complex network theory has been widely used to analyze the topology of the network and the financial contagion problems,and the network topology has important implications for contagion problem.Due to liquidity risk can be transmitted through interbank business to other institutions,the stability of only one institution cannot ensure the entire financial system’s safety.And complex network approach can be used to analyse the entire system.Complex networks method is widely used by many countries,in order to solve a series of questions of banking system:1.look for core institutions of the banking system,such as Netherlands;2.assess the risk of the banking system,such as Austria;3.study the contagion risk of banking system,which provides important implications for policy-making,such as Germany,United States and United Kingdom.Therefore,this paper stduys interbank liquidity risk contagion problem based on complex network theory,to examine the contagion process and results of liquidity risk contagion under the situation of different shocks.The logic of this paper is as follows:Firstly,review and evaluate relevant literature,summarize transmission channels as well as important topology indicators which influence the results of congtaion.Secondly,analyse interbank liquidity risk contagion on the basis of complex networks and regulatory issues.By "money shortage"(2013)event analysis,focusing on the causes and contagion mechanisms of interbank liquidity risk,including asset prices contagion mechanism,information contagion mechanism and bilateral exposures contagion mechanism,provides important information for later model-building.Thirdly,estimate bilateral positions of 94 financial organizations of 2013 using the maximum entropy method,construct the interbank network and analyse important network topology indicators-node degree and degree distribution,interbank exposure,and clustering coefficient which have an effect on risk contagion according to existing literature.This lays the foundation for choosing default node.Then,use agent-based network simulation model(referred to as ABNS),incorporating the behaviors of financial organizations,to study interbank liquidity risk contagion,including the simulation of idiosyncratic shocks,common shocks,price shocks,combination shocks and foreign bank defaults and the simulation results are analyzed.Finally,summarize the important opinions and conclusions of this paper,and put forward suggestions.In this paper,we draw the conclusion that the default of the hubs is particularly serious.Therefore,we made five suggestions to supervise the hubs:1.pay attention to interbank business size and its distribution,strengthen the management of liquidity gap;2.strengthen interbank business exposure management to prevent counterparty risk;3.strengthen interbank business maturity mismatches management;4.the central bank should inject liquidity into the hubs when market liquidity tightens to a certain extent;5.regulator should collect bilateral exposures data of financial institutions.Innovations of this paper are:1.construct interbank network of China and empirically analyze its topology,based on the data of 94 financial institutions in 2013.2.construct ABNS model to study interbank liquidity risk contagion,in order to take into account the impact of behavior of microscopic participants on liquidity risk contagion. |
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