Abstract: Liability structure is not only the foundation and starting point for the stable operation of banks, but also the meaning required by the improvement of the quality and efficiency of financial services to the real economy. The findings of the empirical study based on the data of China’s listed commercial banks show that, though wholesale financing is negatively correlated with ex ante individual risk indicators, it in fact reduces the stability of banks; this impact is especially obvious on the listed non-state-owned commercial banks. Wholesale financing will increase the contagion risk of the listed commercial banks and the risk exposure of the listed non-state-owned commercial banks via institutional connectedness. Meanwhile, no significant interbank peer monitoring exists among the listed banks, and the individual bank risk has no significant impact on the wholesale financing cost, nor enough evidence can be found to support that banks can disperse individual risks through institutional connectedness; on the contrary, institutional connectedness has enhanced the impact of wholesale financing on bank credit risks. Consequently, it is necessary to enhance the information disclosure mechanism of the liability financial products, strengthen the supervision of systemically vulnerable banks, increase the weight of wholesale financing in the evaluation of systematic important banks and the importance in the macro-prudential regulation, and improve the quality of debt and the stickiness of deposit customers.

Key words: wholesale financing, bank risks, institutional correlation, peer monitoring