Network Structure Analysis of the Brazilian Interbank Market

Thiago Silva (thiagochris@gmail.com), Sergio Souza and Benjamin Tabak

No 391, Working Papers Series from Central Bank of Brazil, Research Department

Abstract: In this paper, we provide a detailed analysis of the roles FIs play within the interbank market using a network-based approach. We investigate how the interbank network evolves with respect to different types of market participants. For this analysis, we employ several well-known complex network measures that extract topological characteristics of the interbank network. We use the weighted clustering coefficient to assess the substitutability of FIs for the lending and borrowing perspectives and find that large banking institutions are counterparties that are easily substitutable. In addition, we verify that the interbank network presents a high disassortative mixing pattern, suggesting that highly connected FIs are frequently connected to others with very few connections. This finding is in line with the fact that interbank networks often show a core-periphery structure. We also investigate the presence of the ``rich-club'' effect on the network and find that it is strongly present in the community comprising the large banking institutions, as they normally form near-clique structures. Since they often play the role of liquidity providers in the interbank market, this interconnectedness effectively endows the network with robustness, as participants that are with liquidity issues can easily substitute counterparties that are liquidity suppliers.

Date: 2015-06
New Economics Papers: this item is included in nep-ban and nep-net
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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Journal Article: Network structure analysis of the Brazilian interbank market (2016)
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