Abstract
The paper investigates contagion risk of interbank market via matrix method with a complete network structure. We make a study of contagion risk and the proportion of failed bank assets by exploiting the two conditions of the core capital adequacy ratio is less than 6% and the loss is higher than the bank’s tier 1 capital, and compares the size of the difference of liquidity ratio before and after the risk. The results show that we can more accurately obtain the order of bank failures based on the above three criteria. Meanwhile, (not) vulnerable banks and the sequence of importance of Bank of Communications, Minsheng Bank, Shanghai Pudong Development Bank and Industrial Bank are given in the banking system.
Highlights
The risk of the banking industry that is the core of a national financial system has fundamental differences with other financial industries
A typical example is the financial crisis caused by the subprime mortgage crisis in the United States in 2008
With the development of economy, the trade links between China and the world’s major economic systems are becoming more and more close, and the proportion of foreign trade in the economy is getting higher and higher, so the possibility that the crisis spreads to our country through the trade channel is growing
Summary
Yanxin Wang*1, Yong Wu2 *1, 2 Chongqing University of Technology, China Abstract: The paper investigates contagion risk of interbank market via matrix method with a complete network structure. We make a study of contagion risk and the proportion of failed bank assets by exploiting the two conditions of the core capital adequacy ratio is less than 6% and the loss is higher than the bank’s tier 1 capital, and compares the size of the difference of liquidity ratio before and after the risk. (not) vulnerable banks and the sequence of importance of Bank of Communications, Minsheng Bank, Shanghai Pudong Development Bank and Industrial Bank are given in the banking system. Cite This Article: Yanxin Wang, and Yong Wu. “A RESEARCH ON RISK CONTAGION OF CHINESE INTERBANK MARKET.”.
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