Research On The Impact Of Bank Liquidity Creation On Systemic Risk

The 2008 subprime mortgage crisis revealed that bank liquidity creation accelerated the accumulation of crises within the system,triggering systemic risks and hindering economic growth.In the modern financial intermediary theory,the commercial bank of financial transaction media is the core of modern finance.It injects liquidity into social and economic entities by absorbing deposits and issuing loans.Different liquidity creation forms of banks have inherent vulnerability.Periodic fluctuations in external real estate,falling house prices,and changes in credit environment can lead to a decline in the scale and quality of bank credit,which can have an unavoidable impact on bank liquidity creation.Once systemic risk is caused by banks,its consequences are widespread,and it is highly likely to further lead to a chain reaction among financial or non-financial institutions,with the harm spreading to the real economy.Therefore,studying the impact of liquidity creation in commercial banks on systemic risk in banks has significant theoretical and practical significance.This article constructs and measures systemic risk β based on quarterly data from 32 listed banks in China.Taking into account the actual situation in China,improvements are made to the liquidity creation indicator,which is in line with China’s national conditions.We use unbalanced panels to study the impact of liquidity creation in commercial banks on systemic risk,and further decompose systemic risk into tail risk and "bank connectivity".On this basis,we explore the ways in which bank liquidity creation affects systemic risk.Afterwards,the heterogeneity of bank liquidity creation on systemic risk was studied from the perspectives of bank size,bank deposits,and bank capital.Research on stock market disasters has found that the accumulation of stock market factors weakens the inhibitory effect of bank liquidity creation.In the robustness test,this paper carries out endogenous processing,clustering robust standard error processing,eliminating samples and eliminating the interference of outlier.This article found that:firstly,in the specific environment of China,bank liquidity creation suppresses systemic risk.Secondly,the negative correlation between liquidity creation and systemic risk in China is driven by tail risk;research on stock market disasters has found that the accumulation of stock market factors weakens the inhibitory effect of bank liquidity creation.Thirdly,in the analysis of bank heterogeneity,it was found that bank liquidity creation has a more significant negative impact on national banks,low shareholder equity banks,and low deposit banks.The research conclusion has certain reference value for the selection and coordination of financial regulatory methods in China,and has certain enlightening effects on preventing the aggregation of bank fragility,high-quality financial operation,and maintaining financial stability.