IDEAS home Printed from https://ideas.repec.org/a/pal/palcom/v11y2024i1d10.1057_s41599-024-02932-7.html
   My bibliography  Save this article

Evaluating financial fragility: a case study of Chinese banking and finance systems

Author

Listed:
  • Li Shang

    (Jiangsu Second Normal University)

  • Biao Zhou

    (Nanjing University of Finance and Economics)

  • Jiannan Li

    (Nanjing University of Information Science & Technology)

  • Decai Tang

    (Nanjing University of Information Science & Technology
    Sanjiang University)

  • Valentina Boamah

    (Nanjing University of Information Science & Technology)

  • Zhiwei Pan

    (Nanjing University of Information Science & Technology)

Abstract

Global financial systems are inherently fragile due to their complexities. Thus, it is of great interest to devise various methods to assess the dynamics of financial fragility. As such, this study builds a financial fragility evaluation index system. The study finds three major fluctuations in the trend of financial fragility due to the great recession in 2008, the huge financial volatility in 2015, and the COVID-19 pandemic in 2019. It also tests the index system on the Chinese finance market from 2007 to 2022. Observations of capital adequacy, non-performing loans, and liquidity ratios, in addition to the average return on total assets, are used to assess banking fragility. The results attained show that amongst the tested banks, the Bank of Ningbo has the lowest vulnerability score, mainly due to its higher average return on total assets, capital adequacy ratios, and lower non-performing loan ratio. On the other end of the spectrum, China Minsheng Bank has the highest vulnerability score due to its lower capital adequacy and higher non-performing loan ratios. These findings provide valuable insights into the banking sector in China for policy formulation.

Suggested Citation

  • Li Shang & Biao Zhou & Jiannan Li & Decai Tang & Valentina Boamah & Zhiwei Pan, 2024. "Evaluating financial fragility: a case study of Chinese banking and finance systems," Palgrave Communications, Palgrave Macmillan, vol. 11(1), pages 1-9, December.
    • Handle: RePEc:pal:palcom:v:11:y:2024:i:1:d:10.1057_s41599-024-02932-7
    DOI: 10.1057/s41599-024-02932-7
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1057/s41599-024-02932-7
    File Function: Abstract
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1057/s41599-024-02932-7?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Aikman, David & Kiley, Michael & Lee, Seung Jung & Palumbo, Michael G. & Warusawitharana, Missaka, 2017. "Mapping heat in the U.S. financial system," Journal of Banking & Finance, Elsevier, vol. 81(C), pages 36-64.
    2. Hamdaoui, Mekki & Maktouf, Samir, 2020. "Financial reforms and banking system vulnerability: The role of regulatory frameworks," Structural Change and Economic Dynamics, Elsevier, vol. 52(C), pages 184-205.
    3. Kaminsky, Graciela L., 2006. "Currency crises: Are they all the same?," Journal of International Money and Finance, Elsevier, vol. 25(3), pages 503-527, April.
    4. Yuliyan Mitkov, 2019. "Inequality and Financial Fragility," CRC TR 224 Discussion Paper Series crctr224_2019_090, University of Bonn and University of Mannheim, Germany.
    5. Georgiadis, Georgios & Zhu, Feng, 2021. "Foreign-currency exposures and the financial channel of exchange rates: Eroding monetary policy autonomy in small open economies?," Journal of International Money and Finance, Elsevier, vol. 110(C).
    6. Sánchez Serrano, Antonio, 2021. "The impact of non-performing loans on bank lending in Europe: An empirical analysis," The North American Journal of Economics and Finance, Elsevier, vol. 55(C).
    7. Djebali, Nesrine & Zaghdoudi, Khemais, 2020. "Threshold effects of liquidity risk and credit risk on bank stability in the MENA region," Journal of Policy Modeling, Elsevier, vol. 42(5), pages 1049-1063.
    8. Kanga, Désiré & Murinde, Victor & Soumaré, Issouf, 2020. "Capital, risk and profitability of WAEMU banks: Does bank ownership matter?," Journal of Banking & Finance, Elsevier, vol. 114(C).
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Luis J. Mena & Vicente García & Vanessa G. Félix & Rodolfo Ostos & Rafael Martínez-Peláez & Alberto Ochoa-Brust & Pablo Velarde-Alvarado, 2024. "Enhancing financial risk prediction with symbolic classifiers: addressing class imbalance and the accuracy–interpretability trade–off," Palgrave Communications, Palgrave Macmillan, vol. 11(1), pages 1-11, December.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Sebnem Kalemli-Ozcan & Herman Kamil & Carolina Villegas-Sanchez, 2016. "What Hinders Investment in the Aftermath of Financial Crises: Insolvent Firms or Illiquid Banks?," The Review of Economics and Statistics, MIT Press, vol. 98(4), pages 756-769, October.
    2. Wang, Jiamei & Chen, Haibin & Zhang, Heng & Luo, Jianchao & Cheng, Mingwang & Zhang, Jiaping, 2022. "Property rights reform and capital adequacy ratios of rural credit cooperatives in China," Economic Modelling, Elsevier, vol. 106(C).
    3. Murat Cakir, 2017. "A conceptual design of "what and how should a proper macro-prudential policy framework be?" A globalistic approach to systemic risk and procuring the data needed," IFC Bulletins chapters, in: Bank for International Settlements (ed.), Uses of central balance sheet data offices' information, volume 45, Bank for International Settlements.
    4. Nuri Yildirim & Huseyin Tastan, 2012. "Capital Flows and Economic Growth across Spectral requencies: Evidence from Turkey," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 59(4), pages 441-462, September.
    5. Jean-Charles Bricongne & Leonor Coutinho & Alessandro Turrini & Stefan Zeugner, 2020. "Is Private Debt Excessive?," Open Economies Review, Springer, vol. 31(2), pages 471-512, April.
    6. Bespalova, Olga, 2018. "Forecast Evaluation in Macroeconomics and International Finance. Ph.D. thesis, George Washington University, Washington, DC, USA," MPRA Paper 117706, University Library of Munich, Germany.
    7. Hartwig, Benny & Meinerding, Christoph & Schüler, Yves S., 2021. "Identifying indicators of systemic risk," Journal of International Economics, Elsevier, vol. 132(C).
    8. Andrade, Sandro C. & Kohlscheen, Emanuel, 2010. "Pessimistic Foreign Investors and Turmoil in Emerging Markets : The Case of Brazil in 2002," The Warwick Economics Research Paper Series (TWERPS) 926, University of Warwick, Department of Economics.
    9. Olszak, Małgorzata & Kowalska, Iwona, 2023. "Do competition and market structure affect sensitivity of bank profitability to the business cycle?," Pacific-Basin Finance Journal, Elsevier, vol. 80(C).
    10. Martínez, Juan Francisco & Oda, Daniel, 2021. "Characterization of the Chilean financial cycle, early warning indicators and implications for macro-prudential policies," Latin American Journal of Central Banking (previously Monetaria), Elsevier, vol. 2(1).
    11. Cumperayot, Phornchanok & Kouwenberg, Roy, 2013. "Early warning systems for currency crises: A multivariate extreme value approach," Journal of International Money and Finance, Elsevier, vol. 36(C), pages 151-171.
    12. Bordo, Michael D. & Meissner, Christopher M. & Stuckler, David, 2010. "Foreign currency debt, financial crises and economic growth: A long-run view," Journal of International Money and Finance, Elsevier, vol. 29(4), pages 642-665, June.
    13. Mustapha Djennas & Mohamed Benbouziane & Meriem Djennas, 2011. "An Approach of Combining Empirical Mode Decomposition and Neural Network Learning for Currency Crisis Forecasting," Working Papers 627, Economic Research Forum, revised 09 Jan 2011.
    14. Lukasz Prorokowski, 2013. "Lessons from financial crisis contagion simulation in Europe," Studies in Economics and Finance, Emerald Group Publishing Limited, vol. 30(2), pages 159-188, May.
    15. Rozite, Kristiana & Bezemer, Dirk J. & Jacobs, Jan P.A.M., 2019. "Towards a financial cycle for the U.S., 1973–2014," The North American Journal of Economics and Finance, Elsevier, vol. 50(C).
    16. Uluc Aysun, 2012. "Capital Flows, Maturity Mismatches, and Profitability in Emerging Markets: Evidence From Bank Level Data," Journal of Developing Areas, Tennessee State University, College of Business, vol. 46(1), pages 211-239, January-J.
    17. Rustam Jamilov & Tobias König & Karsten Müller & Farzad Saidi, 2024. "Two Centuries of Systemic Bank Runs," CRC TR 224 Discussion Paper Series crctr224_2024_589, University of Bonn and University of Mannheim, Germany.
    18. Tjeerd M. Boonman & Jan P. A. M. Jacobs & Gerard H. Kuper & Alberto Romero, 2019. "Early Warning Systems for Currency Crises with Real-Time Data," Open Economies Review, Springer, vol. 30(4), pages 813-835, September.
    19. Hakan Yilmazkuday, 2021. "Welfare costs of bilateral currency crises: The role of international trade," International Finance, Wiley Blackwell, vol. 24(1), pages 119-131, April.
    20. Seyed Alireza Athari, 2022. "Financial Inclusion, Political Risk, and Banking Sector Stability: Evidence from Different Geographical Regions," Economics Bulletin, AccessEcon, vol. 42(1), pages 99-108.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pal:palcom:v:11:y:2024:i:1:d:10.1057_s41599-024-02932-7. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: https://www.nature.com/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.