Interbank contagion risk in China under an ABM approach for network formation. (25th March 2022)

• Record Type: Journal Article
• Authors: Lin, Shiqiang; Zhang, Hairui
• Is Part Of: European financial management. Volume 29:Number 2(2023)
• Page Start: 458
• Page End: 486
• Publication Date: 2022-03-25
• Subjects: agent‐based modelling -- Chinese banking sector -- contagion risk -- interbank network -- simulation; Finance -- European Union countries -- Periodicals; International finance -- Periodicals; Corporations -- European Union countries -- Finance -- Periodicals; 332.094
• DOI: 10.1111/eufm.12360
• Languages: English
• ISSNs: 1354-7798

Abstract

Abstract: This paper uses an agent‐based model to construct an interbank network for the Chinese interbank market using a sample of 299 commercial banks from 2014 to 2019. We analyze the importance and vulnerability of banks using the DebtRank algorithm. Our results show that the Chinese interbank market bears a certain level of systemic risk, especially among lower‐tiered banks. The results also show a bank is more vulnerable if it has a higher interbank lending ratio and greater financial connectivity. Meanwhile, a bank is more influential if it has a larger net worth and greater financial connectivity.