Abstract: This paper uses the principal component analysis method to fit the vulnerability index of China's banking system and analyzes its macro influencing factors. The main conclusions are as follows: firstly, the action mechanism between banking system vulnerability and macroeconomic variables has obvious time-varying characteristics; Secondly, during the sample period, the impact mechanism of GDP growth rate on the vulnerability of the banking system has undergone a structural change, and its structural mutation period is mainly reflected in the U.S. subprime mortgage crisis; Finally, the empirical results based on the time-varying coefficient state space model show that using monetary policy to adjust the growth rate of generalized money supply is an effective means to regulate the vulnerability of the banking system.

Key Words: The fragility of the banking system;  Macro prudential supervision; Time varying coefficient state space model