Financial interbanking networks resilience under shocks propagation

Roy Cerqueti; Matteo Cinelli; Giovanna Ferraro; Antonio Iovanella

doi:10.1007/s10479-022-04567-w

Financial interbanking networks resilience under shocks propagation

Ann Oper Res. 2022 Feb 9:1-21. doi: 10.1007/s10479-022-04567-w. Online ahead of print.

Authors

Roy Cerqueti^{1

2

3}, Matteo Cinelli^{4

5}, Giovanna Ferraro⁶, Antonio Iovanella⁷

Affiliations

¹ Department of Social and Economic Sciences, Sapienza University of Rome, P.le A. Moro, 5, 00185 Rome, Italy.
² GRANEM - Université d'Angers, Angers, France.
³ School of Business, London South Bank University, UK.
⁴ Department of Computer Science, Sapienza University of Rome, Viale Regina Elena, 295, 00161 Rome, Italy.
⁵ Italian National Research Council - Institute for Complex Systems, Via dei Taurini 19, 00185 Rome, Italy.
⁶ Department of Engineering and Architecture, University of Parma, Parco Area delle Scienze, 181/A, 43124 Parma, Italy.
⁷ School of Economics, Università degli Studi Internazionali di Roma - UNINT, Via Cristoforo Colombo, 200, 00147 Rome, Italy.

Abstract

The concept of resilience-i.e., the ability of a unified structure to absorb shocks-is of high relevance in the context of network modelling and analysis, mainly when referred to finance. This paper starts from this premise, and deals with the resilience of a financial interbanking system. At this aim, we firstly introduce a new measure of the resilience of a network, by taking into full consideration the influence of the topology of the network and the weights of its links in the shocks propagation; then, we build one financial network model related to the quarterly-based interbanking sector, whose weights are calibrated on high quality empirical data; lastly, we compute the resilience measure of the considered networks. A discussion of the results is provided, by considering both finance and network theory perspectives.

Keywords: Bank for International Settlements; Financial interbanking networks; Interconnectedness; Network modelling and analysis; Resilience; Shock propagation.