Resilience of United Kingdom financial institutions to major uncertainty: A network analysis related to the Credit Default Swaps market

Miia Chabot, Jean-Louis Bertrand and Eric Thorez

Journal of Business Research, 2019, vol. 101, issue C, 70-82

Abstract: The banking sector plays an important role in the UK economy as a whole, and investors are increasingly concerned about the ability of UK-based banks to withstand the consequences of major uncertainty such as the Brexit. This paper investigates the UK financial system resilience using networks of relationships related to the Credit Default Swap market. We propose a detailed descriptive analysis of the topology of the networks, and characterize the nature of relationships between financial institutions. We compare our results with theoretical network configurations (small-worlds, preferential attachments, etc.) to reveal the connection dynamics of the networks we identify. We then develop a panel analysis including variables of centrality and influence of banks in their networks. We identify prominent banks and groups of banks that could disrupt the system. Our results help identify priority areas of action by regulators and risk managers.

Keywords: Networks; CDS spreads; Prominence analysis; Brexit (search for similar items in EconPapers)
JEL-codes: D85 E44 G21 G28 L14 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbrese:v:101:y:2019:i:c:p:70-82

DOI: 10.1016/j.jbusres.2019.04.003

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