How Does Bank Liquidity Creation Affect the Systemic Risk of Commercial Banks?——Based on the Perspective of Systemic Risk Decomposition
Based on unbalanced panel data from 30 commercial banks in China from the first quarter of 2007 to the first quarter of 2021,this study empirically examines how bank liquidity creation affects commercial bank systemic risk by decomposing bank systemic risk into two dimensions:tail risk of a single bank and the correlation between individual banks and the system.Research finds that the creation of bank liquidity significantly reduces the tail risk of individual banks,but increases the correlation between individual banks and the system,and the overall effect increases the systemic risk of banks.Heterogeneity testing indicates that for non-domestic systemically important banks with lower capital ratios,the systemic risk and systemic correlation enhancement effect of liquidity creation are stronger.Further research finds that the positive impact of bank liquidity creation on systemic risk is more pronounced during financial crises,and is driven by the creation of debt side liquidity.In addition,the statutory reserve requirement ratio helps to mitigate the systemic risk enhancement effect of bank liquidity creation.Therefore,the creation of bank liquidity should be included in the regulatory scope,a three-dimensional risk supervision system should be established,macro prudential supervision and micro prudential supervision should be optimized,in order to safeguard high-quality economic development.
bank liquidity creationsystemic risktail risksystemic correlation
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