The Generation Mechanism of Systemic Risk in the Chinese Banking Industry

The rapid expansion of Internet finance impacts the macro economy through currency supply and demand, interest rates, household consumption, and social financing, leading to the misuse of monetary policy and unusual macroeconomic fluctuations, causing credit expansion and non-performing loans in bank. The dynamic positive feedback mechanism formed by the financial system and the macro economy amplifies the boom and bust cycles, leading to the instability of the financial system, and evolving into the systemic risk of the banking industry. On the basis of theoretical analysis, this paper employs the GMM model and VAR model to verify the risk generation mechanism.