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A network approach to interbank contagion risk in South Africa

Pierre Nkou Mananga, Shiqiang Lin and Hairui Zhang

Journal of Financial Stability, 2025, vol. 77, issue C

Abstract: We investigate the resilience of the South African banking sector by applying a dynamic agent-based model and the DebtRank algorithm. In contrast to previous studies focusing on listed banks, our methodology includes both listed and non-listed institutions that make up the banking industry, thereby capturing the systemic importance and vulnerability of all banks within the interbank market network. Our findings indicate that while larger banks exhibit greater systemic importance, a statistically significant correlation exists between a bank’s interbank-lending-to-equity ratio and vulnerability. Moreover, a bank’s size and specific interbank activities influence its systemic contribution, both in terms of importance and vulnerability. These insights offer policymakers an empirically grounded framework for improving financial stability monitoring and risk mitigation efforts.

Keywords: Systemic risk; Interbank network; Contagion risk; Agent-based; Modelling; DebtRank (search for similar items in EconPapers)
JEL-codes: C63 E58 G17 G21 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finsta:v:77:y:2025:i:c:s1572308925000154

DOI: 10.1016/j.jfs.2025.101386

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