The Empirical Study Of Commercial Bank Risk Contagion Effect

Banks occupy an unshakable position in China financial system, which supporting the economy running smoothly. The stability of the banking sector is directly related to the fate of the China economy. Risk management in the banking business is essential, and with the increasing level of financial, banks'success have not been only their own problems, but associated with other banks with which they have some business dealings. To ensure sustained development in China, we must reduce the risk of the banking sector.Banking risk will spread through information channels, foreign channels, business channels, the inter-bank lending channels and so on. From the perspective of the inter-bank lending market, this paper analyzed the risk infection effect which caused by Inter-bank borrowing. Firstly, in theory, this paper described the classification and characteristics of banking risk, observed differences between banking and other industries, studied the transmission mechanisms of banking risk in both the micro and macro level, and found the causes of instability in the banking system. Then, we observed the problems in the banking sector and discussed the supervision in banking sector. Finally, using inter-bank lending data, this paper calculated the risk position matrix with the Matlab program, and simulated the impacts to other banks which caused by the bankruptcy of one individual bank.With the method combining theoretical analysis and empirical analysis, this paper made a systematic analysis to the banking risk infection. Through this study, we can understand the risk of banking system and the operation mechanism of the inter-bank market, and provided appropriate references for reasonable controlling banking systemic risk and strengthen banking supervision.