Research On The Formation Mechanism And Spillover Effect Of Bank Systemic Risk From The Perspective Of Leverage Pro-cyclicality

As China’s economy shifts from high-speed growth to high-quality development,the macro-economy is facing difficulties such as changing the development mode,resolving backward production capacity and insufficient economic growth.At the same time,China’s financial market is also under considerable pressure.On the one hand,commercial banks increase leverage to expand their asset business by expanding their balance sheets,and on the other hand,through inter-bank financial management and off-balance sheet business,they have realized off-balance sheet "invisible and leveraged".In a period of time,China’s banking system is over-leveraged,with severe idling of funds,and declining utilization efficiency.After the 2008 global financial crisis,academic circles and research departments at home and abroad pointed out that the procyclicality formed by the interconnection between the financial system and the economic cycle is one of the important reasons for systemic risks.When comparing the asset-liability structure of financial institutions before and after the crisis,it is found that financial institutions have experienced a dynamic process from "leveraging" to "deleveraging"before and after the crisis.During the economic boom,asset prices in the market rose,financial institutions took the initiative to increase leverage,a large amount of funds flowed out of the financial system,and risks continued to accumulate.During the economic recession,financial institutions are forced to deleverage and continue to shrink the scale of credit,which can easily induce systemic risks.The cyclical expansion and contraction of financial institutions’ balance sheets and leverage ratios make financial institutions an intermediate channel for risk accumulation,infection,spread and amplification,which affects the stability of the financial system and the operation of the macro economy,and also gives the management department macro prudence.Supervision has an important impact.Based on the procyclical perspective of leverage ratio,this artical uses qualitative analysis,quantitative analysis and empirical analysis to construct the basic framework of the article from the theoretical and logical perspective,and studies the formation mechanism and spillover effects of systemic risks in China’s commercial banks.This article mainly includes seven components.The first part studies the literature and theoretical basis of commercial bank leverage procyclicality and systemic risk,focusing on the analysis of the concept,basic connotation and related theories of commercial bank leverage procyclicality.The second part focuses on the analysis of the current internal risks and external shocks faced by China’s commercial banks,and analyzes the formation mechanism of China’s commercial banks’ systemic risks from the perspective of leverage and pro-cyclicality.The third part focuses on the analysis of the current status and characteristics of the leverage level of China’s commercial banks,and then tests the procyclicality of the leverage of China’s commercial banks,and analyzes the factors affecting the leverage procyclicality.The fourth part studies the impact of leverage procyclicality on commercial banks’ systemic risks on the basis of measuring the systemic risks of Chinese commercial banks,and uses the PVAR model to explore the direction and strength of the interaction between leverage procyclicality and systemic risks.The fifth part focuses on the spillover effects of systemic risks in commercial banks,and measures the dynamic correlation and risk spillover levels between industries,and on.this basis analyzes the heterogeneous changes in spillover levels from a cyclical perspective.The sixth part focuses on the impact of the implementation of leverage ratio supervision on the systemic risks of banks.The practice of China’s commercial banks’ leverage ratio supervision and the process of "deleveraging" are sorted out,and the impact of China’s leverage ratio supervision on systemic risks is tested from an empirical point of view.The seventh part summarizes the main conclusions of this article,and puts forward countermeasures and suggestions from the perspective of commercial banks and supervisory departments.The main conclusions of this article are as follows:First,it analyzes the formation mechanism of China’s commercial banks’ systemic risk from the perspective of leverage pro-cyclical,and analyzes the characteristics of China’s commercial banks’ leverage changes when the macro economy is in an upward cycle and a downward cycle.The results show that in the economic upward cycle,excessive leverage by commercial banks has increased the fragility of the commercial banking system,reduced the ability of commercial banks to resist risks,and at the same time magnified the possibility of systemic risks.In the economic downturn,the process of "deleveraging" will worsen the internal assets and liabilities of economic entities.Very small external negative shocks may have an important impact on the commercial banking system and threaten the stability of the financial system.Second,the procyclicality of leverage has an important impact on the systemic risks of China’s banks.The results show that there is a significant positive correlation between systemic risk and the lagging period of bank leverage to a certain extent,which means that the previous period’s bank leverage will have a positive impact on the current period’s systemic risk.There is a significant positive correlation between bank leverage and the periodic components in the rate of the previous period’s GDP growth.Combining the above two points can prove that leverage pro-cyclicality has an important impact on bank systemic risk.Third,it studies the spillover effects of banking systemic risks on related industries.As the macro economy enters an upward cycle and leverage increases,the correlation between the banking industry and other related industries has increased,and the level of risk spillovers has increased significantly.When the macro economy is in an adjustment cycle and leverage is slowly falling,the correlation between the banking industry and other related industries will decrease.The average risk spillover effect will increase in the short term,but in the long run,with the advancement of China’s supply-side structural reforms,the risk spillover effect has been released,reducing the level of marginal risk spillovers to a certain extent.Based on the above research conclusions,this article proposes the following main countermeasures and suggestions:First,in terms of optimizing asset management,commercial banks should establish the concept of capital conservation and establish a long-term,reasonable and feasible capital replenishment mechanism.On the asset side,loan maturity should be optimized,capital maturity mismatches should be reduced,and internal structure management of credit assets should be strengthened.On the liability side,attention should be paid to maintaining stable financing channels,expanding diversified financing channels,and effectively controlling potential risks of asset-liability maturity mismatches.Second,in terms of improving countercyclical capital buffers,efforts should be made to ensure that countercyclical buffering policies can provide reasonable support and protection to the market when the economy is down,and inject appropriate liquidity into the market.The loss absorbing capacity during the economic downturn can be listed as the main objective of the countercyclical buffer policy,while maintaining the bank’s credit supply capacity during the economic downturn.Third,in terms of implementing leverage ratio supervision,it is possible to implement differentiated leverage ratio supervision based on the nature,development scale and business direction of different commercial banks,and strengthen the pertinence of leverage ratio supervision.