251. Do we need to consider multiple inter-bank linkages for systemic risk in China's banking industry? Analysis based on the multilayer network.
- Author
-
Hu, Liqin, Gan, Yiran, and Wen, Huailing
- Abstract
We construct an inter-bank multilayer network that includes direct linkages through interbank transactions and indirect linkages through bond investment, and investigate the systemic risk in Chinese commercial banks in case of credit shocks, liquidity shocks and asset price shocks. According to our study, indirect linkages contribute more to systemic risk than direct linkages, and systemic risks from different types of shocks have different characteristics. We also find an intriguing non-linear effect in the aggregation of different linkages in the multiplex structure by comparing the total risk and the sum of systemic risk of all layers. This study suggests that the regulator should pay attention to the pervasiveness and dynamics of systemic risk, with a particular focus on risk contagion caused by indirect linkages among commercial banks. • Constructs a multilayer interbank network to analyze the interconnectedness and risk contagion of China's banking sector. • Presents the dynamics of banking business and systemic risk in recent years. • Undertakes the decomposition of systemic risk and explores the relative importance of different contagion channels. • The results benefit supervision of the regulatory authorities and investment decisions of investors. [ABSTRACT FROM AUTHOR]
- Published
- 2023
- Full Text
- View/download PDF