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The contribution of shadow banking risk spillover to the commercial banks in China: based on the DCC-BEKK-MVGARCH-Time-Varying CoVaR Model

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Abstract

In recent years, with the rapid expansion of commercial banks' non-standardized business, the systematic correlation between shadow banking and commercial banks in China has been gradually enhanced, which enables the partial liquidity crisis of shadow banking to spread rapidly to commercial banks, leading to the increased vulnerability of China's financial system. Based on this, we built shadow banking indexes of trusts, securities, private lending and investments, introduced the dynamic correlation coefficient calculated by the dynamic conditional correlation multivariate GARCH model into the improved CoVaR model, and used the DCC-BEKK-MVGARCH-Time-Varying CoVaR Model to measure the risk overflow contribution of shadow banking in China. We find that shadow banking and commercial banks have an inherent relationship. Due to their own risks, different types of shadow banking contribute to the risk spillover to commercial banks in different degrees. The risk correlation between shadow banking and commercial banks fluctuates. Securities, trusts, private lending and investments shadow banking have different degrees of risk spillover contributions to commercial banks. Securities shadow banking has the highest risk spillover contribution. The next is trusts shadow banking. The risk spillover contributions from private lending and investments shadow banking are lower, but their volatilities are higher. The supervising department should standardize the information disclosure system of shadow banking and establish the risk firewall of commercial banks and shadow banking from the perspective of the risk spillover contribution.

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Notes

  1. https://epaper.gmw.cn/gmrb/html/2014-05/08/nw.D110000gmrb_20140508_1-13.htm.

  2. The data usually used in this model is the stock price, so matrix A and matrix B in the general form represent stock A and stock B respectively. In this paper, indexes are used to replace stock prices, but there are also two markets, A and B.

  3. http://www.sse.com.cn/market/sseindex/calculation/c/4653624.pdf.

  4. http://www.cbrc.gov.cn/govView_2B22741AFBC446CF890636DACAB71166.html.

  5. In China, some commercial banks are reluctant to provide loans to small and medium-sized enterprises. We call it financial discrimination, which means there is a bias or prejudice against these small and medium-sized enterprises.

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Funding

This work was supported by the  Humanities and Social Sciences Research Youth Fund by Ministry of Education of China under Grant 207YCJ90194,  China’s National Philosophy and Social Science Fund under Grant 19BJL033, China’s National Philosophy and Social Science Fund under Grant 17ZDA037.

Author information

Authors and Affiliations

  1. School of Finance, Nanjing University of Finance and Economics, 3 Wenyuan Road, Qixia District, Nanjing, 210046, Jiangsu, People’s Republic of China

    Chen Zhu

  2. Department of Finance, College of Business, Florida International University, Miami, FL, USA

    Chen Zhu

Authors
  1. Chen Zhu
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Correspondence to Chen Zhu.

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Appendices

Appendix 1

Securities shadow banking (33)

DongBei

HuaXi

DongFang

DongWuZ

ZhengQuan

ZhengQuan

ZhengQuan

hengQuan

GuoYuan

ChangCheng

ZhaoShang

HuaTai

ZhengQuan

ZhengQuan

ZhengQuan

ZhengQuan

GuoHai

HuaLin

CaiTong

GuangDa

ZhengQuan

ZhengQuan

ZhengQuan

ZhengQuan

GuangFa

ZhongXin

TianFeng

ZheShang

ZhengQuan

ZhengQuan

ZhengQuan

ZhengQuan

ChangJiang

GuoJin

DongXing

FangZheng

ZhengQuan

ZhengQuan

ZhengQuan

ZhengQuan

ShanXi

XiNan

HongTa

NanJing

ZhengQuan

ZhengQuan

ZhengQuan

ZhengQuan

XiBu

HaiTong

ZhongYuan

ShenWan

ZhengQuan

ZhengQuan

ZhengQuan

HongYuan

GuoXin

HuaAn

XingYe

GuoTai

ZhengQuan

ZhengQuan

ZhengQuan

JunAn

ZhongGuo

 

YinHe

Trusts shadow banking (48)

MinSheng

LvDi

SongDu

GuoSheng

KongGu

KongGu

GuFen

JinKong

RenDong

JinLong

ShiMao

JinRongJie

KongGu

GuFen

GuFen

HuaLian

HaiDe

ShaHe

XinLi

KongGu

GuFen

GuFen

JinRong

ZhongZhou

HuaXin

YaTong

ZhongTian

KongGu

GuFen

GuFen

JinRong

FanHai

XiShui

HuaFa

AnXin

KongGu

GuFen

GuFen

XinTuo

LvJing

BaoDe

YueTai

ZhongYou

KongGu

GuFen

GuFen

ZiBen

RongFeng

HaTou

DiMa

ZhongLiang

KongGu

GuFen

GuFen

ZiBen

NanShan

YangGuang

FengHuang

ZhongHang

KongGu

GuFen

GuFen

ZiBen

XiangJiang

JingHan

ShouKai

WuKuang

KongGu

GuFen

GuFen

ZiBen

XinCheng

JinKe

ZhongFang

GuoTou

KongGu

GuFen

GuFen

ZiBen

WuTong

FuXing

YueXiu

AiJian

KongGu

GuFen

JinKong

JiTuan

ChengTou

DaGang

XiongMao

TianMao

KongGu

GuFen

JinKong

JiTuan

Investments shadow banking (7)

ShanGuoTouA

JiuDing

ZhongXin

NanHua

TouZi

JianTou

QiHuo

HaiHang

LvTing

RuiDa

 

TouZi

TouZi

QiHuo

Private lending shadow banking (14)

ZheJiang

TaiPingYang

SanXiang

NingBo

DongFang

YinXiang

FuDa

DiYi

HuaChuang

XinHu

HeiMuDan

ChuangYe

YangAn

ZhongBao

JingWei

HuaXia

HuaLi

ShiLianHang

FangJi

XingFu

JiaZu

DongFang

SuNing

 

CaiFu

HuanQiu

Appendix 2

We tested the correlation between large commercial banks, joint-stock commercial banks, urban commercial banks and securities, trusts, investments, private lending shadow banking (Figs. 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17).

Fig. 6
figure 6

Urban commercial banks and private lending shadow banking

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Fig. 7
figure 7

Urban commercial banks and trusts shadow banking

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Fig. 8
figure 8

Urban commercial banks and securities shadow banking

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Fig. 9
figure 9

Urban commercial banks and investments shadow banking

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Fig. 10
figure 10

Joint-stock commercial banks and private lending shadow banking

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Fig. 11
figure 11

Joint-stock commercial banks and investments shadow banking

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Fig. 12
figure 12

Joint-stock commercial banks and trusts shadow banking

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Fig. 13
figure 13

Joint-stock commercial banks and securities shadow banking

Full size image
Fig. 14
figure 14

Large commercial banks and trusts shadow banking

Full size image
Fig. 15
figure 15

Large commercial banks and private lending shadow banking

Full size image
Fig. 16
figure 16

Large commercial banks and investments shadow banking

Full size image
Fig. 17
figure 17

Large commercial banks and securities shadow banking

Full size image

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Zhu, C. The contribution of shadow banking risk spillover to the commercial banks in China: based on the DCC-BEKK-MVGARCH-Time-Varying CoVaR Model. Electron Commer Res 23, 2153–2181 (2023). https://doi.org/10.1007/s10660-021-09530-8

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