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Finding the core: Network structure in interbank markets

  • Iman van Lelyveld
  • Daan in 't Veld

This paper investigates the network structure of interbank markets, which has proved to be important for financial stability during the crisis. First, we describe and map the interbank network in the Netherlands, an exception in the literature because of its small and open banking environment. Secondly, we follow recent analyses of interbank markets of Germany and Italy in estimating the Core Periphery model, using data for the Netherlands instead. We find a significant Core Periphery structure and discuss model selection. The overall analysis opens up new opportunities for systemic risk assessments of the interbank market, especially as more granular data is becoming available for the eurozone.

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File URL: http://www.dnb.nl/en/binaries/Working%20Paper%20348_tcm47-276177.pdf
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Paper provided by Netherlands Central Bank, Research Department in its series DNB Working Papers with number 348.

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Date of creation: Jul 2012
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Handle: RePEc:dnb:dnbwpp:348
Contact details of provider: Postal: Postbus 98, 1000 AB Amsterdam
Web page: http://www.dnb.nl/en/

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  1. Jean Tirole, 2010. "Illiquidity and all its friends," BIS Working Papers 303, Bank for International Settlements.
  2. Cohen-Cole, Ethan & Patacchini, Eleonora & Zenou, Yves, 2011. "Systemic Risk and Network Formation in the Interbank Market," CEPR Discussion Papers 8332, C.E.P.R. Discussion Papers.
  3. Craig, Ben R. & von Peter, Goetz, 2010. "Interbank tiering and money center banks," Discussion Paper Series 2: Banking and Financial Studies 2010,12, Deutsche Bundesbank, Research Centre.
  4. Iman van Lelyveld & Franka Liedorp, 2006. "Interbank Contagion in the Dutch Banking Sector: A Sensitivity Analysis," International Journal of Central Banking, International Journal of Central Banking, vol. 2(2), May.
  5. 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.
  6. Thomas Lux, Daniel Fricke, 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.
  7. Upper, Christian & Worms, Andreas, 2002. "Estimating Bilateral Exposures in the German Interbank Market: Is there a Danger of Contagion?," Discussion Paper Series 1: Economic Studies 2002,09, Deutsche Bundesbank, Research Centre.
  8. Matthew O. Jackson & Brian W. Rogers, 2007. "Meeting Strangers and Friends of Friends: How Random Are Social Networks?," American Economic Review, American Economic Association, vol. 97(3), pages 890-915, June.
  9. 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.
  10. Gai, Prasanna & Haldane, Andrew & Kapadia, Sujit, 2011. "Complexity, concentration and contagion," Journal of Monetary Economics, Elsevier, vol. 58(5), pages 453-470.
  11. Fabio Castiglionesi, 2013. "Financial Intermediation and Liquidity," Rivista di Politica Economica, SIPI Spa, issue 1, pages 7-36, January-M.
  12. 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.
  13. Jean-Charles Rochet & Jean Tirole, 1996. "Interbank lending and systemic risk," Proceedings, Board of Governors of the Federal Reserve System (U.S.), pages 733-765.
  14. F.R. Liedorp & L. Medema & M. Koetter & R.H. Koning & I. van Lelyveld, 2010. "Peer monitoring or contagion? Interbank market exposure and bank risk," DNB Working Papers 248, Netherlands Central Bank, Research Department.
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