TITLE:
The Impact of Liquidity Risk of Commercial Banks on Systematic Risk of Banking Industry: Study of 16 Listed Commercial Banks
AUTHORS:
Qingxia Li
KEYWORDS:
Commercial Bank Risk Management, Banking Systemic Risk, Liquidity Risk, CoVaR, Dynamic Quantile Regression
JOURNAL NAME:
Modern Economy,
Vol.10 No.3,
March
12,
2019
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.