Research On Risk Contagion In Banking Industry Based On Svstemic Network And Limited Rational Behavior Of Market Entities

Over the past century,several financial crises have had profound impacts on the world.The panic of investors,bankruptcy of enterprises,economic recession and unemployment caused by the crisis have brought huge harm to the national economy and the life of people.Facilitated by the Basel Committee,the Financial Stability Board and other international cooperation organizations,the global financial risk management system has been constantly improved.But,it turns out that the current financial risk management system is unable to prevent the occurrence of financial crisis.In 2008,the global economic crisis triggered by the sub-prime crisis,caused huge losses to many countries again.In recent years,with the fading influences of financial crisis,the global economy is synchronized recovering.The monetary policies of major developed economies tend to be normal,resulting in further tightening of global liquidity.Rising inverse globalization,trade protectionism,and international trade friction,show a turbulent international situation in the world,which requires higher and higher risk management ability of our national financial and economic system.The 19th National Congress of the Communist Party of China clearly proposed that "preventing the occurrence of systemic financial risk is the eternal theme of financial work".At present,China's reform and opening up has entered into the key stage.In the process of financial reform and opening up,preventing and resolving financial risk have become an important task for financial development.Reviewing the financial crises in past century,they all experienced the process of risk contagion,from a single risk source to the overall outbreak of systemic risk.Therefore,the research on financial risk contagion has always been one of the hot issues in the researches about systemic risk.In order to deeply understand the formation mechanism of systemic risk and analysis the risk contagion process,so as to improve the risk management system and prevent the occurrence of systemic financial risk,this thesis builds up an analysis framework and theory model of risk contagion,based on the existing researches.Take the most representative bank as example of financial institution,this thesis combines three kinds of risk contagion path and limited rational behavior of market entities under the influence of three behavioral finance factors,into a comprehensive risk contagion model of banking industry.Not only making a new exploration in theory and expanding new directions in this research field,but also fully capturing the reality of the process of financial risk contagion with various factors,this thesis is designed to be a more in-depth and detailed study of risk contagion in banking industry,with great significance to the risk management of China's banking industry and even the entire financial industry.This thesis mainly divides into four aspects:first,exploring risk contagion mechanism of three paths(counter-party default,common asset holdings,liquidity rollover)and influence of limited rational behavior of market entities under the influence of three behavioral finance factors(information spillover,heterogeneous beliefs,investor sentiment)on risk contagion,and further building up an analysis framework and theory model of risk contagion in banking industry based on systemic network and limited rational behavior of market entities;second,simulating the evolution process of risk contagion about how the initial shock spreads through banking industry to be systemic risk,at the same time recording the extent and probability of contagion and the risk of each bank in each period,so as to explore special phenomenons under impact of behavior financial factors and analyze superimposed effect of different paths and factors;third,using data of 46 listed Chinese commercial banks,based on analysis of the risk absorption capacity and risk exposure of different banks under various risk contagion paths,stress tests are conducted in the banking industry by combining with the risk contagion model,and countermeasures are put forward for the supervision of Chinese banking industry based on analyzing the results of stress tests;fourth,establishing the supervision system of risk contagion from two aspects of prudential supervision and government assistance,comparing the degree of risk contagion under different supervision indicators and network structure by sensitivity analysis method,and studying the way,timing and target of government assistance by natural experiment method to verify the policy effect.The main innovations are reflected in the following aspects:first,based on the existing theories and models,building up an analysis framework and theory model of risk contagion in banking industry from perspectives of systemic network and limited rational behavior of market entities,breaking up the perfect rationality hypothesis,efficient market hypothesis,complete and symmetric information hypothesis in traditional finance theory and introducing behavioral finance theory;second,mostexisting researches about risk contagion in banking industry only focus on the extent and probability of contagion,this thesis also records information about banks during thewhole period of contagion,which brings more details about risk contagion process and deeper analysis of specific reason for bank crisis in different period;third,based on existing macro and micro prudential supervision method,further developing the meso prudential supervision method on the basis of bank risk contagion path from perspective of systemic network,and comparing the effect of different way,timing and target of government assistance by natural experiment method,in order to improve the supervision system of risk contagion in banking industry;fourth,in the research on the risk contagion of liquidity rollover path under the influence of information spillover,phenomenons such as "saltatory" risk contagion and "circular liquidity trap",and the"risk discovery" function of information spillover are found,and the corresponding policy enlightenments are proposed based on the analysis of the internal causes.The main conclusions are as follows:first,there is a significant superimposed effect of the three risk contagion paths,which indicates that all paths are indispensable in the study of risk contagion in banking industry;second,all the limited rational behaviors under the influence of three behavioral financial factors have significant influence on the process of risk contagion and are too important to be ignored in research;third,the existence of information spillover makes the liquidity risk contagion in liquidity rollover path appears special phenomenons such as "saltatory" risk contagion and "circular liquidity trap",which suggests that under the influence of information spillover,liquidity risk contagion will become hidden,saltatory and explosive,in additional the "risk discovery" function of information spillover provides a new idea in regulation on inter-bank lending;fourth,in Chinese banking industry,large state-owned commercial banks are relatively robust,but Industrial Bank,Bank of Tianjin,Bohai Bank,Chongqing Rural Commercial Bank and most urban commercial banks are seriously affected by risk contagion in different paths;fifth,in the study of supervision system of risk contagion,the leverage and liquidity regulation on micro perspective and additional regulatory requirements on macro perspective can effectively reduce the extent of risk contagion in banking industry,and from meso perspective,forming complete or regional network structure,increasing asset density,improving diversification,implementing differentiation asset allocation strategy and increasing heterogeneity of bank,can strengthen the robustness of systemic network structure,and continuously assistance of broken systemically important banks during the crisis can be more efficient to limit the risk contagion in banking industry.