Contagion in a Banking Network

Financial crises are caused by numerous factors, which impedes the study of critical phenomena in banking networks. The shock initiated by a single institute bankruptcy can result in avalanches or absorption. Systemic risk in banking ecosystems also depends on the network topology and system’s adaptability.

Banking networks of arbitrary topology can be modeled, and critical phenomena can be studied using indicators of single bank stability and banking system stability. Our network model contains the interbank and bank-to-customer links as edges, and has tunable policies of banks and customers. It is a multiplex that is used for taking types of liabilities into account by assigning edges of different kinds of debt (long-term, short-term loans) to the corresponding multiplex layer.

A scenario of shock contagion for a network of 100 banks and about 3000 customers is used as an illustration. The graphs show the dynamics of bankruptcy number, average node degree, customer activity parameters, and financial loss.

Publications

  • Guleva V., Dukhanov A.

    Influence of the External Environment Behaviour on the Banking System Stability // Procedia Computer Science. — 2015. — Vol. 51. — pp. 1603-1612.

  • Guleva V. Y., Skvorcova M. V., Boukhanovsky A.V.

    Using Multiplex Networks for Banking Systems Dynamics Modelling // Procedia Computer Science. — 2015. — Vol. 66. — pp. 257-266.

Projects

  • The Russian Science Foundation #14–21–00137, 15.08.2014