Encyclopedia
The world has entered the digital economy era. As a developing country, China's banking industry plays an important role in the financial industry, and its size ranks first in the world. Therefore, it is of great significance to study the systemic risks of China's banks in the digital economy era. We first compare the traditional indicator approach and the market-based approach theoretically, and Conditional Value at Risk (CoVaR) model, a market-based approach, is considered to be an efficient way to discover systemic risk in different perspectives. Based on static and dynamic models, we evaluate the contributions of sixteen China's listed banks to the systemic risk. Furthermore, we model bank exposures, extend the models by considering extreme circumstance, and incorporate the effects of Fintech and non-bank financial institutions. The results show the levels of systemic risks and the corresponding systemic importance rankings vary in different time periods. We find that the contributions of some small banks to systemic risk are even higher than some big banks during the sample period. Moreover, the big banks face less risks than most of the small banks when the banking system is in distress. We make suggestions for improving financial supervision and maintaining financial stability.
- bank
- financial stability
- systemic risk
- CoVaR
- systemically important banks
- Fintech
- digital economy era
- Introduction
The world has entered an era of digital economy. Tapscott originally proposed the concept of the digital economy [1–2]. With the development of science and technology, the understanding of the digital economy has become clearer. According to a G20 report, the digital economy is defined by the economic activities where the digitized information and knowledge are considered as critical production factors with the development of modern information network, which boosts the growth and optimizes the economic structure [3]. The International Monetary Fund (IMF) defines a broad form of digital economy by the digitalization in all sectors of the economy. The use of the Internet could be considered as an exact example of the digitalization, and the 21st century is an era of the digital economy. During the period, a series of economic activities that incorporate data and the Internet grow quickly and change the society [4]. In the digital economy era, Fintech, a combination of finance and technology, emerges and is playing an increasingly important role. Furthermore, the traditional concept of financial supervision needs to be developed and updated in the digital economy era.
