Does oil future increase the network systemic risk of financial institutions in China?

The fluctuation of oil futures price greatly influences the market investment sentiment, which can cause credit risk and capital pressure risk of various financial institutions, and ultimately affect the idiosyncratic risk and systemic risk of financial institutions. This paper adopts MES to measure the systemic risk of Chinese financial institutions and proposes a high-dimensional time-varying parameter spillover network matrix to identify the infection route and source of systemic risk. Finally, the paper investigates the mechanism by that oil futures affect the contagion effect of systemic risk across institutions. The results show that banking financial institutions are the main exporters of risk while insurance is the main absorber, and after the outbreak of COVID-19, the risk contagion capacity of institutions generally increased, the network structure became more complex, and the risk spillover level was pro-cyclical. The empirical results show that the rise of oil futures will promote the (net) risk spillover capacity of institutions and inhibit the risk absorption capacity, and the above process can be transmitted through the stock market, bond market, and foreign exchange market.