Research On The Impact Of Common Industry Loan Link On Banking Systemic Risk

The outbreak of the subprime mortgage crisis in 2008 brought great damage to the economic development of countries around the world.After the crisis,academia and regulators discovered that the business transactions between financial institutions have made the financial system a complex and tight network.The relationship between banks has become a channel for risk transmission.Therefore,the academic and regulatory authorities have shifted the focus of preventing systemic risks from "too big to fail" to "too interconnected to fail".Bank links are mainly divided into direct links caused by interbank debt and indirect links caused by holding common assets and common loans.As far as China is concerned,banks do not hold common assets because mixed operations are not allowed.This greatly reduces the indirect connection of Chinese banks.Therefore,the academic community and the regulators pay more attention to the direct connection of banks.However,in recent years,with the deepening of the marketization of interest rates and the intensified competition for bank loans,the indirect links established by banks through common loans have become increasingly close.The industry loan allocation is the top level of bank loan allocation,and banks also have a "herd effect" that follows each other in the industry loan allocation.Therefore,if the indirect link caused by the common industry loan is not regulated,then correlation is likely to become an important channel for risk transmission,triggering potential systemic risks.Therefore,it is of great significance to study the link of common industry loan to maintain the stable development of finance.In this context,this article studies the impact of common industry loan link on banking systemic risk.First,a systematic review of domestic and foreign related research on systemic risks and co-loans,and from a theoretical perspective,the main impact mechanism of common industry loan link on banking systemic risks.Then,based on the stock return data of 16 listed banks in China and the CSI 300 Bank Index from 2010 to 2018,the GARCH-tvp-Copula-Co Va R method was used to measure the systemic risks of listed banks,including systemic risk contributions and systemic risks exposure two aspects,and analyze the cross-sectional characteristics and time series characteristics of the systematic risk indicators in the two aspects.Next,based on the semi-annual bank industry loan data from 2011 to 2018,the initial link network was obtained by using the decreasing-model method and the Euclidean distance method,and use the minimum spanning tree method to filter out the redundant information in the initial link network to build a minimum spanning tree network for bank common industry loans.The closeness of the centrality of the listed bank nodes in the network was measured to measure the degree of correlation in the common industry loan.Finally,on the basis of the previous research,a panel model including systemic risk and the degree of common industry loan correlation,bank individual characteristics variables,and macroeconomic variables was constructed,empirical research on the impact of common industry loan associations on systemic risks of banks.The empirical research results show that:(1)In terms of the cross-sectional characteristics of systemic risk,the state-owned bank’s systemic risk contribution is relatively high,the systemic risk exposure is the lowest,and the ability of outward spillover risk and resistance to external risks is strong.Except for state-owned banks,systemic risk contributions and systemic risk exposures have no significant relationship with the type of bank.Some national joint-stock banks have relatively high systemic risk contributions.A few banks have high systemic risk contributions and systemic risk exposures.They have a strong ability to spill out risks and have a weak ability to resist external risks.The ability to resist risks is relatively low,and it is easy to fall into trouble(such as bankruptcy).Because of its strong risk spillover ability,it will overflow the risk to the entire banking system when it is in trouble,thereby aggravating systemic risk.In terms of timing characteristics,both systematic risk contributions and systematic risk exposures are procyclical.2015 "Stock market volatility" has a greater impact on the systematic risk exposures of Bank of China and China Construction Bank,which greatly weakened the Bank of China and China Construction Bank ’s ability to resist external risks.(2)State-owned banks have obvious clustering phenomenon in the common industry loan minimum spanning tree network,and they are closely related.China Merchants Bank and Shanghai Pudong Development Bank have a relatively high closeness of the centrality and are highly connected to other banks.They are the core nodes of a common industry loan minimum spanning tree network.Although stateowned banks have relatively large asset and loan scales,they are not core nodes in the network,indicating that in the common industry loan minimum spanning tree network,"too big" does not mean "too connected".(3)Common industry loan link have a significant positive impact on banking systemic risk contributions.Common industry loan link have improved banks’ ability to outflow risks.Banks in trouble will pass risk to the banking system through the indirect channel of common industry loan link,so as to trigger systematic risks,which makes the bank more "important" in systemic risk.The common industry loan link has a significant positive impact on banking systemic risk exposure.The common industry loan link weakens the bank’s ability to resist external risks.During a crisis,the banking system will pass risks to a single banking institution through the indirect channel of the common industry loan link,thereby exacerbating systemic risk,which makes the bank more “fragile” in systemic risk.The impact of common industry loan link on banking systemic risk exposures is greater than the impact on systemic risk contributions.