Exploring Systemic Risk of Chinese SIFIs using a Simplified SRISK Model
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Abstract
The exposure of banks to systemic risk has been rising in an ever more financialized and interconnected economy. In China, economic slowdown and more non-performing loans mean that the financial system has operate in an increasingly stressed environment, strengthening the vulnerability of future systemic shortfall. In this study, systemic risk in Chinese systematically important financial institutions (SIFIs) is analyzed using a simplified SRISK model. The results are set into historical context, its characteristics are illustrated, and compared to an existing risk index. With that the study contributes to the existing literature by exploring application the SRISK model from a regulatory framework and illustrating some of its implications on Chinese SIFIs. The key findings include (1) an increasing trend of systemic risk exposure and (2) evidence for a divergence between volatility and systemic risk since the 2008 financial crisis.
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Long Paper
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