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Discovering SIFIs in interbank communities

Author

Listed:
  • Nicolò Pecora
  • Alessandro Spelta

    (Università Cattolica del Sacro Cuore
    Dipartimento di Economia e Finanza, Università Cattolica del Sacro Cuore)

Abstract

This paper proposes a new methodology based on non-negative matrix factor- ization to detect communities and to identify Systemically Important Financial In- stitutions in the interbank network as well as within communities. The method is speci cally designed for directed weighted networks and it is able to take into account exposures on both sides of banksbalance sheets, distinguishing between Systemically Important Borrowers and Lenders. Using interbank transactions data from the e-Mid platform, we show that the systemic importance associated with Italian banks decreased during the 2007-2009 nancial crisis while the opposite happened for foreign institutions. We also show that, as the transactions volume grew, the number of communities rose as well. The contrary happened during the crisis phase. Moreover results indicate that, during nancial crisis, banks strongly operate into non overlapping communities with few institutions playing the role of SIFIs. On the contrary during business as usual times banks act in several and overlapping modules.

Suggested Citation

  • Nicolò Pecora & Alessandro Spelta, 2016. "Discovering SIFIs in interbank communities," DISCE - Working Papers del Dipartimento di Economia e Finanza def037, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).
  • Handle: RePEc:ctc:serie1:def037
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    File URL: http://dipartimenti.unicatt.it/economia-finanza-def037.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Financial networks; community detection; systemic risk.;
    All these keywords.

    JEL classification:

    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • C02 - Mathematical and Quantitative Methods - - General - - - Mathematical Economics

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