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Identifying systemically important banks through multi-channel risk contagion analysis under dynamic credit easing policies

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  • Cao, Xiangdi
  • Zhang, Chao

Abstract

This study develops a risk contagion framework for identifying systemically important banks (SIBs), focusing on interbank lending and common asset holdings. Credit easing intensity is incorporated into the model to evaluate its impact on risk contagion, and a novel approach for identifying SIBs is proposed. A case study of China's banking system reveals three key results: (1) several large banks are identified as SIBs due to their capacity to generate substantial systemic risk, and a joint analysis of both contagion channels reveals higher systemic risk than separate single-channel analysis; (2) the rising average DebtRank from 2020 to 2023 reflects increased risk accumulation and heightened systemic vulnerability in the banking system; (3) systemic risk declines with greater credit easing, but contagion through common asset holdings remains more volatile than through interbank lending. These findings provide forward-looking insights for maintaining financial stability and strengthening the prudential regulation of SIBs.

Suggested Citation

  • Cao, Xiangdi & Zhang, Chao, 2026. "Identifying systemically important banks through multi-channel risk contagion analysis under dynamic credit easing policies," Economic Modelling, Elsevier, vol. 162(C).
    • Handle: RePEc:eee:ecmode:v:162:y:2026:i:c:s0264999326001793
    DOI: 10.1016/j.econmod.2026.107650
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