Abstract: At present, many empirical studies and simulation experiments have found the phenomenon of risk contagion in the banking network system and studied the relationship between network structure and risk contagion, but the mechanism of risk contagion is still unclear. Firstly, this paper constructs a banking network system and then defines the bank clearing ratios, threat index, and spillover effects. After that, default bank set in the banking system is calculated according to clearing ratio, the threat index is calculated based on the set of defaulting banks, the spillover effect of each bank is determined based on the threat index, and the multi-stage contagion mechanism caused by defaulting banks is analyzed. It is found that the risk contagion of the banking system is related to the spillover effect of each bank. The greater the spillover effect, the more the stage of contagion, the stronger the effect. Furthermore, a study of the spillover effects of Chinese default banks in 2018 found that Longjiang Bank, National Australia Bank, Guiyang Bank, and Chengde Bank were the four banks with the largest spillover effects, and their defaults had the largest impact on the risk contagion of the banking network of China.

Key words: banking network structure, debt default risk, threat index, spillover effect, multi-stage contagion mechanism