Green credit and systemic risk: From the perspectives of policy and scale

Chien-Chiang Lee (), Qian Xiao and Xiaoming Zhang

The North American Journal of Economics and Finance, 2025, vol. 77, issue C

Abstract: After putting forward the twin goals of peak emissions and carbon neutrality, China is now paying greater attention to green finance development. As the main conduit for implementing green credit policy, commercial banks generally focus on the impact of systemic risk within their own industry. Based on data from listed commercial banks in China from 2008 to 2021, this research uses the conditional value at risk (CoVaR) model to measure systemic risk. The empirical results show that implementing green credit policy lowers banks’ systemic risk, whereas increasing the scale of green credit significantly cuts the systemic risk level of banks overall, large state-owned commercial banks, and joint-stock commercial banks. The findings further illustrate that commercial banks alleviate the systemic risks of banks by reducing the capital adequacy ratio and the non-performing loan ratio while actively issuing green credit.

Keywords: Green credit policy; Commercial banks; Systemic risk; CoVaR; China (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:77:y:2025:i:c:s1062940825000427

DOI: 10.1016/j.najef.2025.102402

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