How FinTech Affects Bank Systemic Risk: Evidence from China

In this paper, we investigate whether and how financial technology (FinTech) affects the systemic risk of Chinese banks. Based on bank-level panel data and the system generalized method of moments (SYS-GMM), we find that FinTech increases both banks' exposure and their contribution to systemic risk, and these effects only occur in local commercial banks, less profitable banks, and banks in regions with less developed FinTech. We also investigate the source of FinTech's influence and find that it increases the scale of interbank business and enhances the correlation between banks that increases the possibility of risk contagion.