Systemic risk in banking networks: Advantages of “tiered” banking systems

Teteryatnikova, Mariya

doi:10.1016/j.jedc.2014.08.007

Cited by 31 publications

(16 citation statements)

References 82 publications

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“…The authors …nd that scale-free networks are more vulnerable because of (a) sub-optimal liquidity allocation, and (b) higher heterogeneity among participants which increases the exposure of the banking system to contagion. Teteryatnikova (2012) assesses the advantages of multi-tier systems …nding that the resilience of the banking network to systemic shocks increases with the level of tiering.…”

Section: Complex Banking Networkmentioning

confidence: 99%

Complex Financial Networks and Systemic Risk: A Review

Bougheas

Kirman

2015

Dynamic Modeling and Econometrics in Economics and Finance

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. In this paper we review recent advances in financial economics in relation to the measurement of systemic risk. We start by reviewing studies that apply traditional measures of risk to financial institutions. However, the main focus of the review is on studies that use network analysis paying special attention to those that apply complex analysis techniques. Applications of these techniques for the analysis and pricing of systemic risk has already provided significant benefits at least at the conceptual level but it also looks very promising from a practical point of view. Terms of use: Documents in EconStor mayJEL-Code: D850, G200.

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Section: Complex Banking Networkmentioning

confidence: 99%

Complex Financial Networks and Systemic Risk: A Review

Bougheas

Kirman

2015

Dynamic Modeling and Econometrics in Economics and Finance

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“…Anand et al (2012) address the heavy reliance on short-term wholesale funding markets in a vastly and increasingly connected financial system during the global financial crisis of 2007/2008, leading to a dramatic increase in rollover risk at the system level. Further studies focus on the interbank credit network structure and the financial linkages between banks, often applying agent-based simulations (Krause and Giansante, 2012;Teteryatnikova, 2014;Bech et al, 2015;Capponi and Chen, 2015).…”

Section: Introductionmentioning

confidence: 99%

Interbank credit and the money manufacturing process: a systemic perspective on financial stability

Biondi

Zhou

2018

J Econ Interact Coord

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Interbank lending and borrowing occur when financial institutions seek to settle and refinance their mutual positions over time and circumstances. This interactive process involves money creation at the aggregate level. Coordination mismatch on interbank credit may trigger systemic crises. This happened when, since summer 2007, interbank credit coordination did not longer work smoothly across financial institutions, eventually requiring exceptional monetary policies by central banks, and guarantee and bailout interventions by governments. Our article develops an interacting heterogeneous agent-based model of interbank credit coordination under minimal institutions. First, we explore the link between interbank credit coordination and the money generation process. Contrary to received wisdom, interbank credit has the capacity to remove the inner limits of monetary system capacitance. Second, we develop simulation analysis on imperfect interbank credit coordination, studying impact of interbank dynamics on financial stability and resilience at individual and aggregate levels. Systemically destabilizing forces prove to be related to the working of the banking system over time, especially interbank coordination conditions and circumstances. Highlights• An interacting heterogeneous agent-based model under minimal institutions is developed to study bank credit, money creation and interbank credit• Interbank credit makes the money generation process unbound in some circumstances• Financial stability depends on both bank and inter-bank credit conditions and circumstances

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“…Some scholars studied the stability of the banking system with scale-free network or core-edge network. Among them, Krause and Giansante [7], Teteryatnikova [8] and Sui et al [9] studied it under the scale-free network, Borgatti and Everett [10] and Lux [11] studied the core-edge network. Krause and Giansante [7] simulated interbank network with different scale-free parameters, their study suggested that the smaller the interbank scale-free parameter and the higher the degree of concentration, the smaller the possibility of contagion.…”

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confidence: 99%

“…Krause and Giansante [7] simulated interbank network with different scale-free parameters, their study suggested that the smaller the interbank scale-free parameter and the higher the degree of concentration, the smaller the possibility of contagion. Teteryatnikova [8] simulated the banking system under special shocks caused by operational risk or credit risk using two methods: heterodyne network and scale-free network. The research showed that as long as the highly connected banks were fully capitalized, the risk of systemic crisis and the scope of crisis in the banking system were both low, and the resilience of scale-free network to contagion increased with the level of tiering.…”

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confidence: 99%

The Stability of Banking System Based on Network Structure: An Overview

Gao¹,

Fan²,

Shen³

2018

JMF

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The global financial crisis triggered by the US subprime mortgage crisis in 2008 has caused serious impact on the financial system around the world, which also aggravated the banking system. Since the banking industry is the core element of financial system, various scholars and relevant regulatory authorities have paid attention to the stability of the banking system. Unlike the traditional qualitative research, many scholars have adopted the method of computational finance based on the complex network theory to explore the banking system in recent years. Therefore, this paper has carried out a literature review of the stability of banking system under different network structures. It presents the analysis of model and results so as to have a clear understanding on the topic.

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Systemic risk in banking networks: Advantages of “tiered” banking systems

Cited by 31 publications

References 82 publications

Complex Financial Networks and Systemic Risk: A Review

Complex Financial Networks and Systemic Risk: A Review

Interbank credit and the money manufacturing process: a systemic perspective on financial stability

The Stability of Banking System Based on Network Structure: An Overview

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