Research into the Mechanism for the Impact of Climate Change on Systemic Risk—A Case Study of China’s Small- and Medium-sized Commercial Banks

Yongping Liu, Chunzhong Huang, Zongbao Zou, Qiao Chen and Xuan Chu
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Yongping Liu: Guangzhou Rural Commercial Bank, Guangzhou 510627, China
Chunzhong Huang: School of Business, Sun Yat-sen University, Guangzhou 510275, China
Zongbao Zou: Business School, Shantou University, Shantou 515063, China
Qiao Chen: School of Business, Sun Yat-sen University, Guangzhou 510275, China
Xuan Chu: Guangdong-Hong Kong-Macao Greater Bay Area Investment Group, Guangzhou 510627, China

Sustainability, 2020, vol. 12, issue 22, 1-21

Abstract: Climate change is one of the gravest threats facing human society today, as well as an important factor for financial stability. This study takes 11 small- and medium-sized listed banks as subjects, measures the banks’ systemic risk using the CoVaR model and climate change using daily average temperature, and explores the mechanism between these two factors. Additionally, it investigates the influence of climate change on systemic risk in commercial banks through intermediary variables (e.g., commercial banks’ loan-deposit ratio, NPL ratio, and net interest margin). The results are as follows: (1) There is a positive correlation between climate change and systemic risk in banks within the confidence interval. (2)The indirect effect of climate change on systemic risk in banks through the NPL ratio is significantly positive, meaning that climate warming increases the NPL ratio and therefore increases the banks’ systemic risk.

Keywords: climate change; systemic risk; loan-to-deposit ratio; non-performing loan ratio; net interest margin (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:gam:jsusta:v:12:y:2020:i:22:p:9582-:d:446612

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