November 25, 2015
The topological properties of interbank networks have been discussed widely in the literature mainly because of their relevance for systemic risk. Here we propose to use the Stochastic Block Model to investigate and perform a model selection among several possible two block organizations of the network: these include bipartite, core-periphery, and modular structures. We apply our method to the e-MID interbank market in the period 2010-2014 and we show that in normal conditions the most likely network organization is a bipartite structure. In exceptional conditions, such as after LTRO, one of the most important unconventional measures by ECB at the beginning of 2012, the most likely structure becomes a random one and only in 2014 the e-MID market went back to a normal bipartite organization. By investigating the strategy of individual banks, we explore possible explanations and we show that the disappearance of many lending banks and the strategy switch of a very small set of banks from borrower to lender is likely at the origin of this structural change.
Similar papers 1
July 23, 2012
We study the frictions in the patterns of trades in the Euro money market. We characterize the structure of lending relations during the period of recent financial turmoil. We use network-topology method on data from overnight transactions in the Electronic Market for Interbank Deposits (e-Mid) to investigate on two main issues. First, we characterize the division of roles between borrowers and lenders in long-run relations by providing evidence on network formation at a year...
February 14, 2018
Interbank markets are often characterised in terms of a core-periphery network structure, with a highly interconnected core of banks holding the market together, and a periphery of banks connected mostly to the core but not internally. This paradigm has recently been challenged for short time scales, where interbank markets seem better characterised by a bipartite structure with more core-periphery connections than inside the core. Using a novel core-periphery detection metho...
April 2, 2020
The long-lasting socio-economic impact of the global financial crisis has questioned the adequacy of traditional tools in explaining periods of financial distress, as well as the adequacy of the existing policy response. In particular, the effect of complex interconnections among financial institutions on financial stability has been widely recognized. A recent debate focused on the effects of unconventional policies aimed at achieving both price and financial stability. In p...
Interbank markets are fundamental for bank liquidity management. In this paper, we introduce a model of interbank trading with memory. Our model reproduces features of preferential trading patterns in the e-MID market recently empirically observed through the method of statistically validated networks. The memory mechanism is used to introduce a proxy of trust in the model. The key idea is that a lender, having lent many times to a borrower in the past, is more likely to lend...
November 14, 2016
Assessing the stability of economic systems is a fundamental research focus in economics, that has become increasingly interdisciplinary in the currently troubled economic situation. In particular, much attention has been devoted to the interbank lending market as an important diffusion channel for financial distress during the recent crisis. In this work we study the stability of the interbank market to exogenous shocks using an agent-based network framework. Our model encom...
A growing number of systems are represented as networks whose architecture conveys significant information and determines many of their properties. Examples of network architecture include modular, bipartite, and core-periphery structures. However inferring the network structure is a non trivial task and can depend sometimes on the chosen null model. Here we propose a method for classifying network structures and ranking its nodes in a statistically well-grounded fashion. The...
September 28, 2020
This paper provides the first empirical network analysis of the Argentine interbank money market. Its main topological features are examined applying graph theory, focusing on the unsecured overnight loans settled from 2003 to 2017. The network, where banks are the nodes and the operations between them represent the links, exhibits low density, a higher reciprocity than comparable random graphs, short average distances and its clustering coefficient remains above that of a ra...
Relationship lending is broadly interpreted as a strong partnership between a lender and a borrower. Nevertheless, we still lack consensus regarding how to quantify the strength of a lending relationship, while simple statistics such as the frequency and volume of loans have been used as proxies in previous studies. Here, we propose statistical tests to identify relationship lending as a significant tie between banks. Application of the proposed method to the Italian interban...
September 29, 2021
We study the difference between the level of systemic risk that is empirically measured on an interbank network and the risk that can be deduced from the balance sheets composition of the participating banks. Using generalised DebtRank dynamics, we measure observed systemic risk on e-MID network data (augmented by BankFocus information) and compare it with the expected systemic risk of a null model network, obtained through an appropriate maximum-entropy approach constraining...
December 31, 2019
Systemic liquidity risk, defined by the IMF as "the risk of simultaneous liquidity difficulties at multiple financial institutions", is a key topic in macroprudential policy and financial stress analysis. Specialized models to simulate funding liquidity risk and contagion are available but they require not only banks' bilateral exposures data but also balance sheet data with sufficient granularity, which are hardly available. Alternatively, risk analyses on interbank networks...