Economic volatility, banks' risk accumulation and systemic risk

Preventing systemic risk from the perspective of bank risk accumulation has been widely researched and supported. This study focuses on the impact of economic volatility on bank risk accumulation and systemic risk. Using the proportion of non-core liabilities as the bank's risk accumulation index, we show that low economic volatility increases bank risk accumulation but decreases systemic risk. However, banks with a higher risk accumulation in a period of low economic volatility will have a greater increase in systemic risk in periods of high economic volatility. Our study is significant for forward-looking systemic risk prevention.

Automated summary

This study examines the relationship between economic volatility, bank risk accumulation, and systemic risk. The findings suggest that low economic volatility increases bank risk accumulation but decreases systemic risk. However, banks with higher risk accumulation during periods of low economic volatility experience a greater increase in systemic risk during periods of high economic volatility. This research is significant for proactive systemic risk prevention.