Financial institutions’ interconnectedness is a key component of systemic risk. However there is still no consensus on its measurement. Using a unique database of network of exposures of French financial institutions, we compare three strategies to measure interconnectedness: closeness of exposure distributions, identification of core-periphery structure and contagion models. The closeness of exposure distributions is adequate to identify outlier institutions. The “core-periphery” structure, usually applied to banking network, is still valid with insurance companies. However this approach is not immune to size effect. This result contrasts with previous analyses where size was not accounted for. Contagion-based stress-tests are the best suited to capture institutions’ systemic fragility, emphasizing their importance as a supervisory tool.
Being active in both the insurance sector and the banking sector, financial conglomerates intrinsically increase the interconnections between the banking sector and the insurance sector. We address two main concerns about financial conglomerates using a unique database on bilateral exposures between 21 French financial institutions. First, we investigate to what extent to which the insurers that are part of financial conglomerates differ from pure insurers. Second, we show that in the presence of sovereign risk, the components of a financial conglomerate are better off than if they were distinct entities. Our empirical findings bring a new perspective to the previous results of the literature based on using different types of data.
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