Research Of Systemic Risk Of China’s Listed Banks-Based On CoVaR Model

Beginning in August2007, the financial crisis made national banks suffer huge losses. The banking crisis made the world’s large commercial banks’default loss significantly infect and spread to foreign countries, leading to the emergence of global banking systemic risk. Many large commercial banks went bankruptcy and some others were forced to restructure. The "domino effect" has made people pay more attention to the systemic risk of the banking sector. Because the bank systemic risk is significantly infectious and destructive and once it happens, it may endanger the entire financial system and is a serious impediment to the development of a country’s economy, it is of great importance to study the systemic risk of the bank. China’s banking industry was affected a lot in the2008global financial crisis. How each bank contributes to systemic risk and the concrete figures are the study contents of this article. The cause of the bank systemic risk as well as its way of measurement remains to be further researched both at home and abroad. The crisis also warns us that before the outbreak of the crisis, we should use various means and economic indicators to predict the risk situation. And combined with the concrete conditions of each bank in our country, we should make systematic and in-depth research of commercial banks’systemic risk.Based on the simple introduction of the traditional measurement method of systemic risk-VaR method, the essay raises the main body of it-CoVaR method, and makes the detailed introduction of CoVaR method. Using CoVaR method, the essay makes empirical analysis for the twelve commercial banks of our country which listed on the Shanghai stock exchange. Using quantile regression method, it calculates each bank’s VaR value and CoVaR, and on the basis of the VaR value and CoVaR data, it calculates the risk spillover effects of each bank and banking system (△CoVaR) and overflow ratio (%CoVaR).The empirical analysis results show that the state-owned commercial banks in our country have relative strong abilities to resist risk and better risk prevention mechanism. Other banks’abilities to resist risk are much different. Based on the empirical results it can be concluded that using the VaR method to measure the risk between commercial banks and the banking sector as a whole may lead to the gross undervaluation of risk level in the banking sector. And compared with the traditional VaR risk measurement method, CoVaR method can capture the financial institutions’risk spillover effect to other financial institutions. Because it can capture the risk spillover effects of financial institutions to fully show the risk of financial institutions, CoVaR method is a more comprehensive and effective risk measure method. Finally, according to the empirical analysis conclusion, the essay puts forward effective policy suggestions to the regulation and response to the entire banking system’s systemic risk.