Can Regulatory Penalties Reduce a Bank's Systemic Risk?Exploring the Impact of the China Banking Regulatory Commission's Revisions to the Administrative Penalty Measures
Regulatory penalties are an integral component of micro-prudential regulation and play a significant role in ensuring the safety and stability of China's financial sector.This study employed conditional value-at-risk(CoVaR)and marginal expected shortfall(MES)methodologies to assess systemic risk within banks,focusing on data from Chinese listed banks from 2011 to 2021 to examine the effect of regulatory penalties on systemic risk.The findings sug-gest that regulatory penalties are effective in reducing systemic risk spillover.A mechanism analy-sis showed that these penalties decrease systemic risk by lowering banks'leverage and earnings volatility.A heterogeneity analysis further revealed that the risk-mitigating impact of regulatory penalties is more pronounced in banks with higher levels of systemic risk and non-state-owned banks.The study's findings highlight that the 2015 revisions to the administrative penalty meas-ures implemented by the China Banking Regulatory Commission have enhanced the deterrent effect of regulatory penalties,thereby further mitigating systemic risk spillover.Regulatory authori-ties should maintain the consistent application of regulatory penalties to utilize their corrective and steering effects more efficiently in preventing and resolving financial systemic risks.
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