Analysis of China Commercial Banks’ Systemic Risk Sustainability through the Leave-One-Out Approach

Xiaoming Zhang, Chunyan Wei and Stefano Zedda
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Xiaoming Zhang: Department of Finance, Beijing Jiaotong University, Beijing 100044, China
Chunyan Wei: Department of Finance, Beijing Jiaotong University, Beijing 100044, China
Stefano Zedda: Department of Business and Economics, University of Cagliari, 74 09123 Cagliari, Italy

Sustainability, 2019, vol. 12, issue 1, 1-15

Abstract: One of the main issues in the recent Chinese financial reform is aimed at effectively measuring systemic risk and taking appropriate measures to ensure its sustainability and prevent new crises. In this paper, we firstly introduced the present macro-prudential policies implied in China and pointed out the existing problems. Secondly, we analyzed the banks’ assets riskiness and the banks’ probability to default, then, by means of a leave-one-out model, we measured each commercial bank systemic risk contribution. Thirdly, based on comprehensive empirical results and theoretical analysis, we provided some references for macro-prudential regulation and supervision. Results show that systemic risk is increasing in 2013–2017, in particular with reference to contagion risk, with a specific concentration within joint-stock commercial banks, suggesting a specific attention of regulators and supervisors for this category.

Keywords: leave-one-out; stand-alone risk; contagion risk; macro-prudential regulation (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2019
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