ORCID : 0000-0002-7745-0048
Simone Domenico Scagnelli
ORCID : 0000-0003-3578-2359
ORCID : 0000-0002-5784-7646
ORCID : 0000-0001-9596-2648
School of Business and Law
Edith Cowan University - Open Access Support Scheme 2021
Systemic risk contagion is a key issue in the banking sector in maintaining financial system stability. This study is among the first few to use three different distance-to-risk measures to empirically assess the domestic interbank linkages and systemic contagion risk of the Chinese banking industry, by using bivariate dynamic conditional correlation GARCH model on data collected from eight prominent Chinese banks for the period 2006–2018. The results show a relatively high correlation among almost all the banks, suggesting an interconnectedness among the banks. We found evidence that the banking system is exposed to significant domestic contagion risks arising from systemic defaults. Given that Chinese markets deliver weak signals of forthcoming stress in banking sectors, new policy intervention is crucial to resolve the hidden stress in the system. The results have important policy implications and will provide scholars and policymakers further insight into the risk contagion originating from interbank networks.
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Choudhury, T., Scagnelli, S., Yong, J., & Zhang, Z. (2021). Non-traditional systemic risk contagion within the Chinese banking industry. Sustainability, 13(14), article 7954. https://doi.org/10.3390/su13147954