Risk spillover mechanism among commercial banks and FinTech institutions throughout public health emergencies

Jiaojiao Sun, Chen Zhang, Jing Zhu and Jingsong Zhao

The North American Journal of Economics and Finance, 2024, vol. 74, issue C

Abstract: While FinTech has contributed to the improvement of efficiency and cost reduction for commercial banks, it has also brought about risks for them. Especially during the outbreak of major public emergencies, the degree of risk spillover among financial institutions increased significantly. In this paper, we constructed a high-dimensional risk spillover network using the elastic net shrinkage technique to investigate the impact of public health emergencies on the risk spillovers between FinTech institutions and commercial banks. The total spillover index was utilized to access the overall coupling between FinTech institutions and commercial banks. Furthermore, we employed the sectoral spillover index and institutional centrality index to examine the spillover intensity across different sectors and institutions. Additionally, we analyzed the changes in the risk spillover network structure and institutional risk role during emergencies, aiming to uncover the impact mechanism of public health emergencies on risk spillovers. The results reveal that (1) public health emergencies, such as the COVID-19 pandemic, have intensified the industry correlation between the FinTech and banking sectors, and the primary risks of the system have shifted from intraindustry risks to interindustry risks. (2) Public health emergencies have changed the risk transmission roles of FinTechs and banks. FinTechs transitioned from being risk recipients to risk contributors, while banks shifted from being risk contributors to risk recipients. (3) FinTechs play a crucial role in facilitating indirect risk transmission within the system, acting as influential adjacent institutions that bridge the gap between critical institutions. (4) Compared with large commercial banks, small and medium-sized banks are more sensitive to FinTech risks. This study provides supporting evidence for regulatory agencies to enhance risk management in financial innovation during public health emergencies and in the post-pandemic era.

Keywords: Public health emergencies; Financial technology; Complex network; Risk spillover (search for similar items in EconPapers)
JEL-codes: C32 D85 G20 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1062940824001402
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:74:y:2024:i:c:s1062940824001402

DOI: 10.1016/j.najef.2024.102215

Access Statistics for this article

The North American Journal of Economics and Finance is currently edited by Hamid Beladi

More articles in The North American Journal of Economics and Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().