The interbank network across the global financial crisis: Evidence from Italy

Abstract

This study examines the effects of the global financial crisis (GFC) on interbank market connectivity by using network analysis. More specifically, using data on Italian banks' bilateral interbank positions between 1998 and 2013, we analyze the impact of the following events on each bank's network centrality: the liquidity crisis in August 2007, the collapse of Lehman Brothers in September 2008, the Eurosystem's long-term refinancing operations (LTROs) between 2009 and 2012, the sovereign debt crisis in July 2011, and the announcement of Outright Monetary Transactions (OMTs) in 2012. The results show that the 2007 liquidity crisis and especially/above all? the collapse of Lehman Brothers are associated with a marked reduction in the relative interconnectedness of the Italian banking sector (i.e., a shift in the distribution of banks' centrality to the left, away from the most connected bank). In the years that followed, the system progressively recovered its initial patterns of integration among banks, which coincided with the Eurosystem's main monetary policy interventions. However, the average outcome conceals different results across banks, depending on their characteristics and initial positions within the system.

Complexities in Financial Network Topological Dynamics: Modeling of Emerging and Developed Stock Markets

“…While most existing financial network analysis literatures focus on the stock markets or specific economy sectors [46][47][48], a variety of financial systems have been studied as financial network such as global financial institutions [39,40], world trade web [49,50], interbank markets [51][52][53][54], exchanges [55], monetary market [56], corporate networks [57,58], global banking [59], CDS market [60], and credit market [61].…”

“…Many major individual financial markets around the world have also been studied in network approach, such as US [62,63], China [64][65][66], Germany [67,68], EU [69][70][71], Brazil [33,72], Italian [53,56], Korea [73], Russia [74], and Mexico [36,75]. Furthermore, there is literature focusing on the cross-board global markets [76,77].…”

Corporate payments networks and credit risk rating

“…In other cases, as in the seminal paper [14], even if the theoretical framework applies to single firms, the empirical part focuses on the aggregate, sector network, due to lack of more granular data. The use of payments as a proxy of interactions between economic entities is not new and has been investigated mainly for banks [15][16][17][18][19] in the context of systemic risk studies, where, however, other choices to characterise interactions are possible [20][21][22][23]. Apparently much less is known about the payment network between firms, mostly because of lack of data.…”

Literature Review of the Research on Real Estate Financial Risk

“…When discussing the real estate financial risk transmission in China, some scholars found that the financial risk of real estate will impact the land finance [62]. Related empirical evidence can also be found in, e.g., Martinez-Jaramillo et al [63], Paltalidis et al [64], and Affinito and Pozzolo [65].…”