IDEAS home Printed from https://ideas.repec.org/p/boe/boeewp/0516.html
   My bibliography  Save this paper

Mapping the UK interbank system

Author

Listed:
  • Langfield, Sam

    (Bank of England)

  • Liu, Zijun

    (Bank of England)

  • Ota, Tomohiro

    (Bank of England)

Abstract

We present new evidence on the structure of interbank connections in key markets: derivatives, marketable securities, repo, unsecured lending and secured lending. Taken together, these markets comprise two networks: a network of interbank exposures and a network of interbank funding. Network structure varies across and within these two networks, for reasons related to markets’ different economic functions. Credit risk and liquidity risk therefore propagate in the interbank system through different network structures, with implications for financial stability.

Suggested Citation

  • Langfield, Sam & Liu, Zijun & Ota, Tomohiro, 2014. "Mapping the UK interbank system," Bank of England working papers 516, Bank of England.
    • Handle: RePEc:boe:boeewp:0516
    as

    Download full text from publisher

    File URL: https://www.bankofengland.co.uk/-/media/boe/files/working-paper/2014/mapping-the-uk-interbank-system.pdf?la=en&hash=BD1C844D0B39138E57B51BE1F45B73C6FC199F93
    File Function: Full text
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Craig, Ben & von Peter, Goetz, 2014. "Interbank tiering and money center banks," Journal of Financial Intermediation, Elsevier, vol. 23(3), pages 322-347.
    2. Ivan Alves & Stijn Ferrari & Pietro Franchini & Jean-Cyprien Heam & Pavol Jurca & Sam Langfield & Sebastiano Laviola & Franka Liedorp & Antonio Sánchez & Santiago Tavolaro & Guillaume Vuillemey, 2013. "The structure and resilience of the European interbank market," ESRB Occasional Paper Series 03, European Systemic Risk Board.
    3. Wetherilt, Anne & Zimmerman, Peter & Soramaki, Kimmo, 2010. "The sterling unsecured loan market during 2006-08: insights from network theory," Bank of England working papers 398, Bank of England.
    4. Markus K. Brunnermeier & Lasse Heje Pedersen, 2009. "Market Liquidity and Funding Liquidity," The Review of Financial Studies, Society for Financial Studies, vol. 22(6), pages 2201-2238, June.
    5. Falk Bräuning & Falko Fecht, 2017. "Relationship Lending in the Interbank Market and the Price of Liquidity," Review of Finance, European Finance Association, vol. 21(1), pages 33-75.
    6. Gai, Prasanna & Kapadia, Sujit, 2010. "Contagion in financial networks," Bank of England working papers 383, Bank of England.
    7. Freixas, Xavier & Parigi, Bruno M & Rochet, Jean-Charles, 2000. "Systemic Risk, Interbank Relations, and Liquidity Provision by the Central Bank," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 32(3), pages 611-638, August.
    8. Darrell Duffie, 2012. "Over-The-Counter Markets," Introductory Chapters, in: Dark Markets: Asset Pricing and Information Transmission in Over-the-Counter Markets, Princeton University Press.
    9. Darrell Duffie, 2010. "The Failure Mechanics of Dealer Banks," Journal of Economic Perspectives, American Economic Association, vol. 24(1), pages 51-72, Winter.
    10. Upper, Christian & Worms, Andreas, 2004. "Estimating bilateral exposures in the German interbank market: Is there a danger of contagion?," European Economic Review, Elsevier, vol. 48(4), pages 827-849, August.
    11. Nier, Erlend & Yang, Jing & Yorulmazer, Tanju & Alentorn, Amadeo, 2007. "Network models and financial stability," Journal of Economic Dynamics and Control, Elsevier, vol. 31(6), pages 2033-2060, June.
    12. Fricke, Daniel & Lux, Thomas, 2012. "Core-periphery structure in the overnight money market: Evidence from the e-MID trading platform," Kiel Working Papers 1759, Kiel Institute for the World Economy (IfW Kiel).
    13. L. Bargigli & G. di Iasio & L. Infante & F. Lillo & F. Pierobon, 2015. "The multiplex structure of interbank networks," Quantitative Finance, Taylor & Francis Journals, vol. 15(4), pages 673-691, April.
    14. Becher, Christopher & Millard, Stephen & SoramÃÂäki, Kimmo, 2008. "The network topology of CHAPS Sterling," Bank of England working papers 355, Bank of England.
    15. Simon Wells, 2004. "Financial interlinkages in the United Kingdom's interbank market and the risk of contagion," Bank of England working papers 230, Bank of England.
    16. Xavier Freixas, 2005. "Interbank Market Integration under Asymmetric Information," The Review of Financial Studies, Society for Financial Studies, vol. 18(2), pages 459-490.
    17. Q. Farooq Akram & Casper Christophersen, 2010. "Interbank overnight interest rates - gains from systemic importance," Working Paper 2010/11, Norges Bank.
    18. in ’t Veld, Daan & van Lelyveld, Iman, 2014. "Finding the core: Network structure in interbank markets," Journal of Banking & Finance, Elsevier, vol. 49(C), pages 27-40.
    19. Ang, Andrew & Longstaff, Francis A., 2013. "Systemic sovereign credit risk: Lessons from the U.S. and Europe," Journal of Monetary Economics, Elsevier, vol. 60(5), pages 493-510.
    20. Luca Arciero & Ronald Heijmans & Richard Heuver & Marco Massarenti & Cristina Picillo & Francesco Vacirca, 2016. "How to Measure the Unsecured Money Market: The Eurosystem’s Implementation and Validation Using TARGET2 Data," International Journal of Central Banking, International Journal of Central Banking, vol. 12(1), pages 247-280, March.
    21. Furfine, Craig H, 2003. "Interbank Exposures: Quantifying the Risk of Contagion," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 35(1), pages 111-128, February.
    22. Paolo Tasca & Stefano Battiston, "undated". "Diversification and Financial Stability," Working Papers CCSS-11-001, ETH Zurich, Chair of Systems Design.
    23. Gorton, Gary & Metrick, Andrew, 2012. "Securitized banking and the run on repo," Journal of Financial Economics, Elsevier, vol. 104(3), pages 425-451.
    24. Montagna, Mattia & Kok, Christoffer, 2013. "Multi-layered interbank model for assessing systemic risk," Kiel Working Papers 1873, Kiel Institute for the World Economy (IfW Kiel).
    25. Bech, Morten L. & Atalay, Enghin, 2010. "The topology of the federal funds market," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 389(22), pages 5223-5246.
    26. Olivier Armantier & Adam Copeland, 2012. "Assessing the quality of “Furfine-based” algorithms," Staff Reports 575, Federal Reserve Bank of New York.
    27. Iori, Giulia & De Masi, Giulia & Precup, Ovidiu Vasile & Gabbi, Giampaolo & Caldarelli, Guido, 2008. "A network analysis of the Italian overnight money market," Journal of Economic Dynamics and Control, Elsevier, vol. 32(1), pages 259-278, January.
    28. Battiston, Stefano & Gatti, Domenico Delli & Gallegati, Mauro & Greenwald, Bruce & Stiglitz, Joseph E., 2012. "Default cascades: When does risk diversification increase stability?," Journal of Financial Stability, Elsevier, vol. 8(3), pages 138-149.
    29. Mistrulli, Paolo Emilio, 2011. "Assessing financial contagion in the interbank market: Maximum entropy versus observed interbank lending patterns," Journal of Banking & Finance, Elsevier, vol. 35(5), pages 1114-1127, May.
    30. Michael Boss & Helmut Elsinger & Martin Summer & Stefan Thurner, 2004. "Network topology of the interbank market," Quantitative Finance, Taylor & Francis Journals, vol. 4(6), pages 677-684.
    31. Piergiorgio Alessandri & Prasanna Gai & Sujit Kapadia & Nada Mora & Claus Puhr, 2009. "Towards a Framework for Quantifying Systemic Stability," International Journal of Central Banking, International Journal of Central Banking, vol. 5(3), pages 47-81, September.
    32. Brunnermeier, M. & Clerc, L. & Scheicher, M., 2013. "Assessing contagion risks in the CDS market," Financial Stability Review, Banque de France, issue 17, pages 123-134, April.
    33. Hans Degryse & Grégory Nguyen, 2007. "Interbank Exposures: An Empirical Examination of Contagion Risk in the Belgian Banking System," International Journal of Central Banking, International Journal of Central Banking, vol. 3(2), pages 123-171, June.
    34. Kirsten Bonde Rørdam & Morten Linnemann Bech, 2008. "The Topology of Danish Interbank Money Flows," FRU Working Papers 2009/01, University of Copenhagen. Department of Economics. Finance Research Unit.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Marco Bardoscia & Paolo Barucca & Stefano Battiston & Fabio Caccioli & Giulio Cimini & Diego Garlaschelli & Fabio Saracco & Tiziano Squartini & Guido Caldarelli, 2021. "The Physics of Financial Networks," Papers 2103.05623, arXiv.org.
    2. Hüser, Anne-Caroline, 2016. "Too interconnected to fail: A survey of the Interbank Networks literature," SAFE Working Paper Series 91, Leibniz Institute for Financial Research SAFE, revised 2016.
    3. Andre R. Neveu, 2018. "A survey of network-based analysis and systemic risk measurement," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 13(2), pages 241-281, July.
    4. Fabio Caccioli & Paolo Barucca & Teruyoshi Kobayashi, 2018. "Network models of financial systemic risk: a review," Journal of Computational Social Science, Springer, vol. 1(1), pages 81-114, January.
    5. León, C., 2015. "Financial stability from a network perspective," Other publications TiSEM bb2e4e44-e842-45c6-a946-4, Tilburg University, School of Economics and Management.
    6. I�aki Aldasoro & Ignazio Angeloni, 2015. "Input-output-based measures of systemic importance," Quantitative Finance, Taylor & Francis Journals, vol. 15(4), pages 589-606, April.
    7. Upper, Christian, 2011. "Simulation methods to assess the danger of contagion in interbank markets," Journal of Financial Stability, Elsevier, vol. 7(3), pages 111-125, August.
    8. Fariba Karimi & Matthias Raddant, 2016. "Cascades in Real Interbank Markets," Computational Economics, Springer;Society for Computational Economics, vol. 47(1), pages 49-66, January.
    9. Silva, Walmir & Kimura, Herbert & Sobreiro, Vinicius Amorim, 2017. "An analysis of the literature on systemic financial risk: A survey," Journal of Financial Stability, Elsevier, vol. 28(C), pages 91-114.
    10. Pablo Rovira Kaltwasser & Alessandro Spelta, 2019. "Identifying systemically important financial institutions: a network approach," Computational Management Science, Springer, vol. 16(1), pages 155-185, February.
    11. repec:zbw:bofrdp:2013_019 is not listed on IDEAS
    12. Paul Glasserman & Peyton Young, 2015. "Contagion in Financial Networks," Economics Series Working Papers 764, University of Oxford, Department of Economics.
    13. Blasques, Francisco & Bräuning, Falk & Lelyveld, Iman van, 2018. "A dynamic network model of the unsecured interbank lending market," Journal of Economic Dynamics and Control, Elsevier, vol. 90(C), pages 310-342.
    14. León, Carlos & Machado, Clara & Sarmiento, Miguel, 2018. "Identifying central bank liquidity super-spreaders in interbank funds networks," Journal of Financial Stability, Elsevier, vol. 35(C), pages 75-92.
    15. Craig, Ben & von Peter, Goetz, 2014. "Interbank tiering and money center banks," Journal of Financial Intermediation, Elsevier, vol. 23(3), pages 322-347.
    16. León, Carlos & Berndsen, Ron J., 2014. "Rethinking financial stability: Challenges arising from financial networks’ modular scale-free architecture," Journal of Financial Stability, Elsevier, vol. 15(C), pages 241-256.
    17. Toivanen, Mervi, 2013. "Contagion in the interbank network : An epidemiological approach," Research Discussion Papers 19/2013, Bank of Finland.
    18. Martinez-Jaramillo, Serafin & Alexandrova-Kabadjova, Biliana & Bravo-Benitez, Bernardo & Solórzano-Margain, Juan Pablo, 2014. "An empirical study of the Mexican banking system’s network and its implications for systemic risk," Journal of Economic Dynamics and Control, Elsevier, vol. 40(C), pages 242-265.
    19. Paul Glasserman & H. Peyton Young, 2015. "Contagion in Financial Markets," Working Papers 15-21, Office of Financial Research, US Department of the Treasury.
    20. Maryam Farboodi, 2014. "Intermediation and Voluntary Exposure to Counterparty Risk," 2014 Meeting Papers 365, Society for Economic Dynamics.
    21. Aldasoro, Iñaki & Alves, Iván, 2018. "Multiplex interbank networks and systemic importance: An application to European data," Journal of Financial Stability, Elsevier, vol. 35(C), pages 17-37.

    More about this item

    Keywords

    Interbank markets; core-periphery; intermediation; financial networks; market microstructure;
    All these keywords.

    JEL classification:

    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:boe:boeewp:0516. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Digital Media Team (email available below). General contact details of provider: https://edirc.repec.org/data/boegvuk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.