The dual impact of green financial policy on bank risk-taking: inhibiting default and encouraging strategic risk-taking

A stable green finance system is fundamental to sustainable development. This paper finds that the green finance system policy (GFSP) overall reduces bank risk, a conclusion that remains robust under sensitivity analyses, endogeneity test, self-selection of policy objects and additional robustness checks. Further analysis indicates that the GFSP reduces banks’ bankruptcy risk and passive risk, while increasing their active risk. Bank digital transformation plays a significant moderating role, enhancing the inhibitory effect of GFSP on all three types of risk. Heterogeneity tests reveal that these direct effects are more pronounced in larger banks with broader business scopes. These findings provide valuable insights for banks to actively cater to GFSP and advance sustainable development.