A research on stress-testing for the credit risk on falling housing price to business banking—— based on the perspective o
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| Title | A research on stress-testing for the credit risk on falling housing price to business banking—— based on the perspective o
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| Author | Lv Jianglin,Cai Qun and Sun Yajuan |
| Organization | School of Finance;Jiangxi University of Finance & Economics |
| Email | ljl5983@126.com;411213397@qq.com;769340402@qq.com |
| Key Words | commercial bank stress-testing credit risk general equilibrium |
| Abstract | It is widely accepted that there is apparent bubble in Chinese housing market. An important issue is that how much credit risk Chinese commercial banking can bear when housing prices are falling. In the past few years, many major commercial banks and researchers have been addressing this concern by stress-testing. In this study, we show that the current stress-testing methods can be improved through a general equilibrium approach by applying Wilson model. By using quarterly housing market data from the first quarter 2004 to the first quarter 2013, we demonstrate that if the housing price fall exceed 30 percent, ,the business banking will face with huge financial risk, and be difficult to bear, and may eventually results in financial crisis. The important policy implication of this study is that, to control systemic risk in the commercial banking system and avoid financial crisis, the national authority will not only inhibit housing price from soaring, but also prevent it from plummeting. |
| Serial Number | WP714 |
| Time | 2014-09-25 |
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