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Research into the Mechanism for the Impact of Climate Change on Systemic Risk—A Case Study of China’s Small- and Medium-sized Commercial Banks

Author

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  • Yongping Liu

    (Guangzhou Rural Commercial Bank, Guangzhou 510627, China
    School of Business, Sun Yat-sen University, Guangzhou 510275, China)

  • Chunzhong Huang

    (School of Business, Sun Yat-sen University, Guangzhou 510275, China)

  • Zongbao Zou

    (Business School, Shantou University, Shantou 515063, China)

  • Qiao Chen

    (School of Business, Sun Yat-sen University, Guangzhou 510275, China)

  • Xuan Chu

    (Guangdong-Hong Kong-Macao Greater Bay Area Investment Group, Guangzhou 510627, China)

Abstract

Climate change is one of the gravest threats facing human society today, as well as an important factor for financial stability. This study takes 11 small- and medium-sized listed banks as subjects, measures the banks’ systemic risk using the CoVaR model and climate change using daily average temperature, and explores the mechanism between these two factors. Additionally, it investigates the influence of climate change on systemic risk in commercial banks through intermediary variables (e.g., commercial banks’ loan-deposit ratio, NPL ratio, and net interest margin). The results are as follows: (1) There is a positive correlation between climate change and systemic risk in banks within the confidence interval. (2)The indirect effect of climate change on systemic risk in banks through the NPL ratio is significantly positive, meaning that climate warming increases the NPL ratio and therefore increases the banks’ systemic risk.

Suggested Citation

  • Yongping Liu & Chunzhong Huang & Zongbao Zou & Qiao Chen & Xuan Chu, 2020. "Research into the Mechanism for the Impact of Climate Change on Systemic Risk—A Case Study of China’s Small- and Medium-sized Commercial Banks," Sustainability, MDPI, vol. 12(22), pages 1-21, November.
    • Handle: RePEc:gam:jsusta:v:12:y:2020:i:22:p:9582-:d:446612
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    References listed on IDEAS

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    Cited by:

    1. Wu, Xin & Bai, Xiao & Qi, Hanying & Lu, Lanxin & Yang, Mingyuan & Taghizadeh-Hesary, Farhad, 2023. "The impact of climate change on banking systemic risk," Economic Analysis and Policy, Elsevier, vol. 78(C), pages 419-437.
    2. Wang, Daoping & Wang, Yichun & Liu, Yangjingzhuo, 2024. "Temperature variability, natural disasters and bank systemic risk: Evidence from Chinese city commercial banks," Economics Letters, Elsevier, vol. 242(C).

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