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Discovering SIFIs in interbank communities

Nicolò Pecora and Alessandro Spelta ()
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Alessandro Spelta: Università Cattolica del Sacro Cuore

No def037, DISCE - Working Papers del Dipartimento di Economia e Finanza from Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE)

Abstract: This paper proposes a new methodology based on non-negative matrix factor- ization to detect communities and to identify Systemically Important Financial In- stitutions in the interbank network as well as within communities. The method is speci cally designed for directed weighted networks and it is able to take into account exposures on both sides of banksbalance sheets, distinguishing between Systemically Important Borrowers and Lenders. Using interbank transactions data from the e-Mid platform, we show that the systemic importance associated with Italian banks decreased during the 2007-2009 nancial crisis while the opposite happened for foreign institutions. We also show that, as the transactions volume grew, the number of communities rose as well. The contrary happened during the crisis phase. Moreover results indicate that, during nancial crisis, banks strongly operate into non overlapping communities with few institutions playing the role of SIFIs. On the contrary during business as usual times banks act in several and overlapping modules.

Keywords: Financial networks; community detection; systemic risk. (search for similar items in EconPapers)
JEL-codes: C02 D8 L14 (search for similar items in EconPapers)
Pages: 22
Date: 2016-02
New Economics Papers: this item is included in nep-ban, nep-net and nep-rmg
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