Abstract
The US subprime mortgage crisis erupted in 2007, and the most fundamental reason was the depletion of financial intermediation liquidity. The rapid spread of liquidity crisis in the interconnected financial markets, so financial institutions took excessive risks and collapsed. Then the final liquidity risk evolved into systemic risk. Firstly, this paper studies the development history and the latest progress of systematic risk management, the theory of liquidity risk management and the theory of risk-taking behavior management. The paper constructed two dynamic Division number regression to measures ΔCoVaR of 16 commercial banks. Then the dynamic panel regression model is built, which takes the liquidity risk index of individual commercial bank and the interaction between individual commercial bank liquidity risk index and risk-taking index as the main explanatory variables to analyze the banking systemic risk. The research finds that the greater the liquidity risk of individual commercial banks, the higher the contribution of their systemic risk. The risk-taking of individual commercial bank can play an effective role in regulating and weakening its ΔCoVaR. In addition, the large size of the bank does not mean that the greater the contribution of its systemic risk. In terms of liquidity risk regulation, banks would better use liquidity creation indicators and liquidity ratios, rather than loan-to-deposit ratios. Finally, combined with the results of empirical analysis and theoretical analysis, this paper puts forward some suggestions on bank risk management.
Highlights
Before the outbreak of the subprime mortgage crisis, liquidity risk management showed extensively and inefficiently
How much impact liquidity risk will have on the systemic risk of banking industry? The level of risk-taking of banks will play a role in aggravating and deteriorating the systemic risk of banking industry, or This paper focuses on the role of cushioning and reducing the systemic risk of banking industry
The risk preference of banks will be adjusted to bear the risks brought by various market fluctuations, which will weaken the impact of individual commercial banks on the systemic risk of banking industry
Summary
Before the outbreak of the subprime mortgage crisis, liquidity risk management showed extensively and inefficiently. A dynamic panel regression model is built to explore the impact of commercial liquidity risk and its risk-taking on the systemic risk of banking industry. The combination of risk-taking behavior of commercial banks and liquidity risk monitoring indicators can play a positive role in regulating and improving systemic risk. The paper puts forward some suggestions on the liquidity risk management and risk-taking management of banks, in order to achieve the role of systemic risk supervision of the banking industry. It mainly reviews existing domestic and foreign literature from three topic: the impact of liquidity risk on banking systemic risk, the relationship between liquidity risk and risk-taking of commercial banks, and the impact of different types of banks on banking system risk It expounds the progress and shortcomings of current research, and points out the research space of this paper. In the fifth part, according to the theoretical analysis and empirical analysis before, the basic conclusions are summarized, and the corresponding banking risk management suggestions as to the micro-foundation of the banking industry are given, in order to promote the prevention and management of Banking Systemic risk
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