Simulation Of The Risk Contagion Effect Of New Interbank Business

In order to avoid the limit of credit scale and seek new profit space,China’s commercial banks began to develop the innovative inter-bank business represented by resold beneficial rights of trust and inter-bank CDs in recent years.Because of the complicated relationship between a number of financial institutions,the innovation of inter-bank business may lead to severe risk contagion and threat the stability of the entire financial system.After a period of rapid development from 2008 to the middle of 2013,commercial banks began to adjust the scale and structure of the innovative inter-bank business due to the outbreak of the cash crunch and relevant regulatory measures.From the end of 2015,commercial banks began to take advantage of inter-bank CDs to develop the innovative inter-bank business,which lead to the expansion of financial leverage again.This paper attempts to study the contagion effect of innovative inter-bank business of commercial banks in the two time windows above.According to the empirical results,firstly,there is contagion effect of innovative inter-bank business which is closely related to its scale.Secondly,the contagion effect of large state-owned bank failures was significantly greater than the joint-stock banks,while city commercial banks have no obvious risk contagion effect;thirdly,from the aspect of the infection turn,the Industrial Bank,Minshen Bank and Pingan Bank have been the key point in the process of the risk contagion,while the state-owned banks are at the end of the risk contagion process.Based on the above results,this paper argues that regulators should strengthen the monitoring of cash flows of innovative inter-bank business.It should also strictly regulate the operation of the innovative interbank business,requiring the parties involved in the contract to clarify the legal relationship and clear commitments to risk.In addition,we should actively promote the process of credit asset securitization of China’s commercial bank,which is helpful to eliminate the motivation of commercial banks to avoid regulations by innovative inter-bank business.