Network topology of the interbank market

By Michael Boss, Helmut Elsinger, Martin Summer, Stefan Thurner 4. 2003

838 citations recorded by the source corpus.

We provide an empirical analysis of the network structure of the Austrian interbank market based on Austrian Central Bank (OeNB) data. The interbank market is interpreted as a network where banks are nodes and the claims and liabilities between banks define the links. This allows us to apply methods from general network theory. We find that the degree distributions of the interbank network follow power laws. Given this result we discuss how the network structure affects the stability of the banking system with respect to the elimination of a node in the network, i.e. the default of a single bank. Further, the interbank liability network shows a community structure that exactly mirrors the regional and sectoral organization of the current Austrian banking system. The banking network has the typical structural features found in numerous other complex real-world networks: a low clustering coefficient and a short average path length. These empirical findings are in marked contrast to the network structures that have been assumed thus far in the theoretical economic and econo-physics literature.

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Citations in the corpus

Where the Risks Lie: A Survey on Systemic Risk (2017, unknown): “…on studying fully connected networks, many papers document the prevalence of core–periphery networks in real-world banking systems, starting with Boss et al. (2004), so that such networks (as well as more stylized “star networks”) have attracted the attention of later theoretical work (see,…”
The Political Economy of Global Finance: A Network Model (2013, background): “28 See also Kubelec and Sa 2008; Soramäki et al. 2006; Boss et al. 2004; and Iazzetta and Manna 2009.”
Interbank Tiering and Money Center Banks (2010, unknown): “As the concept of tiering 12Bilateral interbank positions often have to be either reconstructed from payment ows (e.g. Fur ne (2003), Bech and Atalay (2010), and Wetherilt et al. (2009)), or estimated from balance sheet data using entropy methods (Upper and Worms (2004), Boss et al. (2004)).”
The Network of Global Corporate Control (2011, background): “, networks of trade [3], products [4], credit [5,6], stock prices [7] and boards of directors [8,9].”
Multiplex Interbank Networks and Systemic Importance: An Application to European Data (2016, unknown): “Starting with the contribution by Boss et al. (2004) based on the Austrian interbank market, other studies made use of alternative country-specific datasets: Craig and von Peter (2014) for Germany, Soramäki et al. (2007) and Bech and Atalay (2008) for the U.S.A., Degryse and Nguyen (2007) for…”
Finding the core: Network structure in interbank markets (2014, unknown): “[7] fit power laws on two different regions in the degree distribution for Austria.”
Systemic risk, financial contagion and financial fragility (2010, methodology): “In particular, we study financial contagion through the interbank market as is commonly done in several works like Iori and Jafarey (2001), Nier et al. (2006), Boss et al. (2004b), and Muller (2006).”
Systemic Risk and Bank Size (2018, unknown): “Our measure is conceptually similar to the one used by Brownlees and Engle (2011), Acharya, Engle and Richardson (2012) and by US and European regulators in their recent stress testing exercises across the banking sector.”
Systemic risk-efficient asset allocations: Minimization of systemic risk as a network optimization problem (2018, methodology): “In contrast, Braverman and Minca (2014) and Guo et al. (2016) base their definition of the price impact on units of assets.”
The formation of financial networks: XXX (2013, background): “Cocco et al. (2003) present empirical evidence for lending relationships existent on the Portuguese interbank market. Furne (2003) studies the interlinkages between the US banks, while Wells (2002) looks at the UK interbank market.”
An empirical study of the Mexican banking system’s network and its implications for systemic risk (2012, unknown): “For example, Wells (2002) studies the UK interbank exposures network in the context of systemic risk and Boss et al. (2004b) as well as Boss et al. (2004a) provide some empirical data on the interbank exposures network of the Austrian banking system; in Iori et al. (2005), the authors provide some…”
Too Interconnected to Fail: A Survey of the Interbank Networks Literature (2015, background): “(15)For an overview of the macro finance literature see for example the survey by Brunnermeier et al. (2013) or by Shin (2010).”
Contagion in financial networks (2010, background): “Brusco and Castiglionesi (2007) model contagion in nancial systems in an environment where contracts are written contingent on the realisation of the liquidity shock.”