Structural changes in the interbank market across the financial crisis from multiple core–periphery analysis

Abstract

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 method on the eMID interbank market, we enrich this picture by showing that the network is actually characterised by multiple core-periphery pairs. Moreover, a transition from core-periphery to bipartite structures occurs by shortening the temporal scale of data aggregation. We further show how the global financial crisis transformed the market, in terms of composition, multiplicity and internal organisation of core-periphery pairs. By unveiling such a fine-grained organisation and transformation of the interbank market, our method can find important applications in the understanding of how distress can propagate over financial networks. Key messages• We study the eMID interbank market using a novel core-periphery detection method to unveil its high-order network organization.• We reveal multiple core-periphery pairs, and detect both tiered and bow-tie (bipartite) structures.• We reveal a topological transition of the market at the global financial crisis, in terms of network segregation and organization. *

Financial interbanking networks resilience under shocks propagation

“…The database is a precious source of information in that it provides evidence for the core-periphery structure of lending among banks worldwide, in line with previous results (see e.g. Cinelli et al 2021 or Kojaku et al 2018 ). The considered model provides insights on the evolution of network resilience in different time periods.…”

The physics of financial networks

“…A specific strand of the literature has focused on characterising the underlying topology of those networks. A few studies looked for the most appropriate emergent block description of financial networks, whether they feature a subset of tightlyconnected institutions, the core, and a subset of institutions, the periphery, which are loosely connected among each other and often connected to the core [64][65][66][67][68] . Post-crisis, the establishment of central clearing counterparties (CCPs) has meant that many contracts were rerouted through a single institution (the CCP).…”

Recent advance on detecting core-periphery structure: a survey

“…Detection of the core-periphery structure can help improve the planning of traffic routes (Verma et al 2016), and explore the deeper cooperation and development relationship of researchers (Rombach et al 2014), improve the cooperation mode of trade networks (Doreian 1985;Fagiolo et al 2010) and explain the characteristics of economic networks (Hidalgo et al 2007;Kojaku et al 2018). The purpose of detecting core-periphery structure is to identify which nodes in the network are in the core position and which nodes are in the marginal position.…”