ECB published a working paper that presents new evidence on the structure of euro area securities markets using a multilayer network approach. The paper utilizes a unique dataset of banking sector cross-holdings of securities to map these exposures among banks and economic and financial sectors. The analytical approach presented in the paper is highly relevant for the design of appropriate prudential measures, since it supports the identification of counterparty risk, concentration risk, and funding risk within the interbank network and the wider macro-financial network.
This paper combines the European Central Bank (ECB) Securities Holdings Statistics by Group (SHSG) with the ECB Securities Holdings Statistics by Sector (SHSS) as well as the Centralized Securities Database (CSDB) to build an interbank network of large euro area banking groups and then extends it to a macro-financial network including sectoral exposures of banks, further broken down by euro area country. The focus is on the 26 largest euro area banking groups, for which exact network of securities cross-holdings is available. The paper presents the multilayer network model of large euro area banks and descriptive statistics on the topology of the network layers. The layers are broken down by key instruments and maturities as well as the secured nature of the transaction. The paper provides a detailed analysis of the funding and exposure network of large euro area bank and helps in analyzing the potential for contagion in the macro-financial network. Granular information about the individual exposures is crucial to monitor and assess contagion risk among banks and the wider macro-financial system,.
Related Link: Working Paper (PDF)
Keywords: Europe, EU, Banking, Securities, Multilayer Network, Interbank Networks, Macro-Prudential Analysis, Concentration Risk, Research, ECB
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