Economic Volatility, Banks’ Risk Accumulation and Systemic Risk

Preventing systemic risk from the perspective of bank risk accumulation has been widely researched and supported. This study focuses on the impact of economic volatility on bank risk accumulation and systemic risk. Using the proportion of non-core liabilities as the bank's risk accumulation index, we show that low economic volatility increases bank risk accumulation but decreases systemic risk. However, banks with a higher risk accumulation in a period of low economic volatility will have a greater increase in systemic risk in periods of high economic volatility. Our study is significant for forward-looking systemic risk prevention.

Keywords: Economic volatility, Non-core liabilities, Risk accumulation, Systemic risk

JEL Classification: G21; G32; B26; D53

Suggested Citation: Suggested Citation

He, Wenjia and He, Wenjing and Xu, Dandan and Yue, Pengpeng, Economic Volatility, Banks’ Risk Accumulation and Systemic Risk. Available at SSRN: https://ssrn.com/abstract=4424608 or http://dx.doi.org/10.2139/ssrn.4424608