Selected paper

Širaňová, Mária
European Banking Network in Light of the Single Supervisory Mechanism from the Network Analysis Perspective
Year: 2015
Volume: 6
Issue: 1
Pages: 35-57
JEL: G18, G21, G28
DOI: 10.5817/FAI2015-1-2


Single Supervisory Mechanism, network analysis, directed weighted network, too-interconnected-to-fail

In this paper we discuss the topological properties of the European banking network and its evolution over time based on the BIS consolidated banking statistics data exploiting information from complex network analysis. Our conclusions are discussed in light of the soon-to-be-launched Single Supervisory Mechanism that takes into account, among other things, the significance of cross-border activity as a precondition for specifying the systemically important European credit institutions. According to our results, the banking network of the EU13 economic space can be characterized as highly asymmetric with a tendency to create clusters based on geographic distance and cultural and social similarities. Additionally, the highly exposed countries are usually dependent on a small number of major creditors while creditor countries tend to spread their power over dependent countries more equally. We advocate that the presence of heterogeneity and asymmetry in the network and a decrease in the level of foreign banking across Europe could be mitigated by the introduction of SSM, and from this perspective it should be viewed as a positive step towards greater financial stability.


Adrian, T. and Brunnermeier, M. (2009). CoVaR. Mimeo, Federal Reserve Bank of New York. Albert, R., Jeong, H. and Barabási, A. L. (2000). Error and attack tolerance of complex networks. Nature, 406(6794), pp. 378-382. DOI: 10.1038/35019019 Albert, R. and Barabási, A. L. (2002). Statistical Mechanics of Complex Networks, Reviews of Modern Physics, 74, pp. 47-97. DOI: 10.1103/RevModPhys.74.47 Allen, F. and Gale, D. (2000). Financial Contagion. Journal of Political Economy, 108(1), pp. 1-33. DOI: 10.1086/262109 Allen, F. and Babus, A. (2008). Networks in Finance. Working Paper 08-07, Wharton Financial Institutions Center. Allen, F., Beck, T., Carletti, E., Lane, P. R., Schoenmaker, D. and Wagner, W. (2011). Cross-Border Banking in Europe: Implications for Financial Stability and Macroeconomic Policies. London: Centre for Economic Policy Research. Barthélemy, M., Barrat, A., Pastor-Satorras, R. and Vespignani, A. (2005). Characterization and Modeling of Weighted Networks. Physica A, 346(1-2), pp. 34-43. Bernanke, B. (2010). Causes of the Recent Financial and Economic Crisis. Before the Financial Crisis Inquiry Commission, Washington, D. C. BIS (2014). Guidelines for reporting the BIS international banking statistics, update 14 March 2014. Available at: Cetorelli, N. and Peristiani, S. (2009). Prestigious Stock Exchanges: A Network Analysis of International Financial Centers. Staff Report no. 384, Federal Reserve Bank of New York. Chan-Lau, J. A. (2010). Regulatory Capital Charges for Too-Connected-to-Fail Institutions: A Practical Proposal. IMF Working Paper WP/10/98. Cifuentes , R., Ferrucci, G. and Shin, H. S. (2005). Liquidity Risk and Contagion. Journal of the European Economic Association, 3(2–3), pp. 556–566. DOI: 10.1162/jeea.2005.3.2-3.556 Claessens, S., van Horen, N. (2012). Foreign Banks: Trends, Impact and Financial Stability. IMF Working Paper WP/12/10. Cocco, J., Gomes, F. and Martins, N. (2009). Lending relationships in the interbank market. Journal of Financial Intermediation, 18(1), pp. 24–48. DOI: 10.1016/j.jfi.2008.06.003 Darvas, Z. and Wolff, G. B. (2013). Should non-euro area countries join the Single supervisory mechanism? Bruegel Policy Contribution, (06), pp. 1-15. De Haas, R., Korniyenko, Y., Loukoianova, E. and Pivovarsk, A. (2011). Foreign Banks During the Crisis: Sinners or Saints? Mimeo, European Bank for Reconstruction and Development. ECB (2014). Regulation of the European Central Bank of 16 April 2014 establishing the framework for cooperation within the Single Supervisory Mechanism between the European Central Bank and national competent authorities and with national designated authorities, European Central Bank, ECB/2014/17, 2014. Fagiolo, G. (2006). Directed or Undirected? A New Index to Check for Directionality of Relations in Socio-Economic Networks. Economics Bulletin, 3(34), pp. 1-12. Furfine, C. (2003). Interbank exposures: quantifying the risk of contagion. Journal of Money, Credit and Banking, 35(1), pp. 111-128. DOI: 10.1353/mcb.2003.0004 Gai, P. and Kapadia, S. (2010). Contagion in Financial networks. Working Paper 383, Bank of England. Granovetter, M. S. (1973). The Strength of Weak Ties. American Journal of Sociology, 78(6), pp. 1360-1380. DOI: 10.1086/225469 Hattori, M. and Suda, Y. (2007). Developments in a Cross-Border Bank Exposure Network. CGFS Papers Chapters, Bank for International Settlements. Hurley, C. (2010). Paying the Price for Too Big to Fail. Entrepreneurial Business Law Journal, 4(2), pp. 351-389. Iori, G., De Masi, G., Precup, O. V., Gabbi, G. and Caldarelli, G. (2008). A network analysis of the Italian overnight money market. Journal of Economic Dynamics and Control, 32(1), p. 259-278. DOI: 10.1016/j.jedc.2007.01.032 Kubelec, C. and Sa, F. (2010). The geographical composition of national external balance sheets: 1980-2005. Bank of England Working Paper Number 384, Bank of England. Markose, S. M. (2012). Systemic Risk from Global Financial Derivatives: A Network Analysis of Contagion and Its Mitigation with Super-Spreader Tax. IMF WP/12/282, International Monetary Fund. Minoiu, C. and Reyes, J. A. (2010). A network analysis of global banking: 1978-2009. WP/11/74, International Monetary Fund. Newman, M. E. J. (2004). Analysis of weighted networks. Physical Review E, 70(5), pp. 613. Popov, A. and Udell, G. (2010). Cross-Border Banking and the International Transmission and Financial Distress during the Crisis of 2007-2008. ECB Working Paper No. 1203, European Central Bank. Schoenmaker, D. and Wagner, W. (2013). Cross-Border Banking in Europe and Financial Stability. International Finance, 16(1), pp. 1-22. DOI: 10.1111/j.1468-2362.2013.12026.x Tarashev, N., Borio, C. and Tsatsaronis, K. (2009). The Systemic Importance of Financial Institutions. BIS Quarterly Review, pp. 75-87.

Call for papers

Call for papers is permanently open for articles across all the research areas.

tel.: +420 549 494 683 | e-mail:
© Copyright 2010–13 IFT