Interbank Network Topology in the Agent-based Model of Banking System

Andrey Leonidov, Vladimir Nechitailo and Ekaterina Serebryannikova
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Andrey Leonidov: P.N. Lebedev Physical Institute, Moscow, Russia
Vladimir Nechitailo: P.N. Lebedev Physical Institute, Moscow, Russia
Ekaterina Serebryannikova: P.N. Lebedev Physical Institute, Moscow, Russia

HSE Economic Journal, 2018, vol. 22, issue 3, 387-417

Abstract: The study analyzes the topology of the interbank network in the agent-based model of the banking system with detailed description of the protocols and stylized one of the external (with respect to the banking system) economy. It is shown that the main incentive for the inter­bank market creation originates from liquidity gaps resulting from maturities mismatch bet­ween deposits and credits. The impact of this effect on the dynamics of total capital and cash in the case of increasing term structure of the yield curve generating credit and deposit’s maturities mismatch as a result of banks optimizing behavior, is illustrated. Different properties of this graph are compared to those of the real interbank networks. It is shown that the model in which banks are represented by agents-automata can reproduce various topological properties of the real interbank networks. These properties are: significant size of the giant strongly connected component, fat?tailed nature of the distributions of In- and Out-degrees, fat-tailed nature of the distribution of allocated funds, disassortativity, nonuniformity of the distribution of clustering coefficient over the vertices. The properties which can be reproduced only in the model with a more detailed description of agents’ behavior were also marked out. These properties are the following: absence of the oriented cycles in the networks with low aggregation of the data, low fraction of the banks not participating in the interbank market and of the net-creditor banks, absence of fat tails in the distribution over the borrowed funds, low clustering coefficient. The reasons for such a difference between the properties of model networks and the real ones are noted. The changes of the model needed to reproduce such properties of real networks are discussed.

Keywords: agent-based model; interbank market; network topology; liquidity gap (search for similar items in EconPapers)
JEL-codes: C63 D85 G17 G21 (search for similar items in EconPapers)
Date: 2018
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