An Empirical Study On The Centralization And Systemic Risk Of Commercial Banks' Loan Industry

The commercial banks' main business is to collect deposits actively and to provide loans to some customers who need financing at a certain interest rate.With the commercial banks' performance report,we can learn the bank's ability to use deposits and find out where the social resources are going as well.The economic growth in China over the past ten years was mainly driven by fixed asset investment.The various fixed asset investment industries represented by real estate,railways,highways,and infrastructure construction have become the fields where commercial banks are racing to invest and the energy industries such as steel and coal have also attracted a great deal of bank credit.However,with the transformation of the domestic economic structure,the slowdown of the medium and long-term economy growth,the emergence of tipping point in the real estate market,the debt-ridden of local governments as well as the excess capacity in the energy industry,these industry's profit margins where bank credits are concentrated on have also dropped significantly.Once these centralized loans default occurs,the banking industry cannot adjust their loan structure within a short period of time,then banks will face enormous funding liquidity risks.As soon as a bank was exposed to the risk,it will be transmitted to others.Finally,it will extend to the whole financial system.What's more,with the increase of global economic instability and great influence of the financial crisis,this kind of risk will be likely happen again.Particularly,the constant rising in non-performing loan ratios of commercial banks over the past ten years indicates that owing to lack of deep understanding of corporate credit and some companies often use unequal information to get the funds from banks and invest in high-risk projects for more profits,all these will lead to a potential crisis.Therefore,we must consider the following issues seriously:(a)the consequences of severe loan inclination;(b)the link between excessive concentration of loans and the risks borne by banks;(c)how to reform to avoid risks.In the previous studies on the relationship between the little literature,there are three different views,that focus on commercial bank loans is higher,the system risk is also higher;commercial bank's loan concentration can reduce the systemic risk;commercial bank loan concentration has no effect on systemic risk.It is worth mentioning that so far,the research on the relationship between the two countries is mainly focused on the banking industry in developed countries.Because of the uniqueness of economic conditions,the research results may be different from those in developed countries.The research on the impact of loan concentration on systemic risk of Chinese commercial banks is at an initial stage.The academic circles generally believe that excessive concentration of Chinese commercial banks will cause systemic risk.So,for China's banking industry,does the bank loan centralization have an impact on the systemic risk?The existing literature has not made a specific answer to this.In view of this,we further study the impact of commercial banks' loan concentration on systemic risk,with a view to provide empirical evidence for Chinese banks based on answering questions,and explore ways to effectively configure loan structure and prevent systemic risks in commercial banks.After the outbreak of the financial crisis in 2008,the systemic risk of the banking industry has been widely concerned.The correlation between bank's concentration and systemic risk is an important topic of regulatory reform after the financial crisis.However,few literatures are deeply analyzed from the perspective of industry,region and customer segmentation.Based on the related data of 16 listed banks in China in 2007-2016 years,According to the Herfindahl index method,this paper calculates modified HHI index based on making loans concentration indicator.Then it uses Garch-CoVaR model to estimate listed commercial bank's systemic risk contribution degree.Finally,based on the relevant auxiliary control variables,the empirical analysis is carried out using panel data.This paper analyzes the impact of the loan industry concentration on the systemic risk of commercial banks.The results show that the degree of centralization of the loan industry has a positive impact on the systemic risk of commercial banks.Therefore,China's regulatory agencies should correctly guide the lending industry of commercial banks to reduce the possibility of systemic risk.The conclusion of the study provides a basis for the regulatory authorities to formulate concrete measures for macro prudential supervision.In view of this,this paper selects the panel data of 16 Chinese listed commercial banks during the 2007-2016 years,and empirically tests the impact of the concentration of commercial banks on the systemic risk.The results show that,the regional concentration and customer concentration and the systemic risk contribution were positively associated,positively and negatively correlated China concentration of listed commercial banks in the payment industry,the possible reason is that the efficiency of supervision effect,enterprise association of area economic development level and the bank's customers.