Reining in the riskiest? Evidence of non-linear impacts of macroprudential regulations on bank systemic risk in China

Abstract

We investigate the impact of macroprudential regulations on systemic risk in Chinese banks. Applying the approach of unconditional quantile regressions to a panel dataset of major Chinese banks from 2002 to 2018, we find supportive evidence for non-linear impacts of macroprudential regulations in mitigating the systemic risk of banks. Specifically, the risk-reducing effects of macroprudential regulations increase with the distributional quantiles of bank systemic risk, implying that macroprudential regulations may be implemented more rigorously on banks with a greater potential to influence systemic stability.