Systemic Risk In Banking Based On Multiplex Networks

Financial activities have expanded rapidly throughout the world with the acceleration of globalization,and the development environment of the financial system is more and more complex.After several financial crises,the theory that financial institutions are too big to fail has been replaced gradually by too connected to fail.Thus,a new perspective to study the financial system,the perspective of financial network,is created.Interbank market is playing a very important role in maintaining the stability of financial system,which has always been one of the most important goals for all countries to pursue economic development.Interbank market,such as interbank lending and holding mutual securities,provides not only a channel for capital to circulate between banks,but also provides a possibility for risk to transmit between them.Thus,interbank systemic risk has gradually become the hot research of domestic and foreigh scholars and regulators,which plays an important role in maintaining the global economic stability and promoting the economic prosperity of the country.In view of the diversification of interbank relationship in interbank market,this paper studies the systemic risk in banking based on multilayer network theory.The interbank market is represented by the multiplex networks with reference to multilayer network theory.The interbank lending market is divided into short-term market and long-term market according to the difference of interbank lending period.This paper formulates the bank’s balance sheet and the interbank multiplex network model is set up.On the basis of the above research,the systemic risk under three different interbank multiplex network models are simulated and analyzed.The long-term interbank market is scale-free network,and the short-term interbank market is random network,small world network and scale-free network.Through the simulation analysis,we get the following main conclusions:(1)With the increase of the net asset ratio,the short-term,long-term and total interbank systemic risk are monotonically decreasing on the whole,and the monotonous decreasing trend of the first two is more significant.(2)There is a positive correlation between the interbank systemic risk and the proportions of different interbank markets,except the impact from the proportion of the short-term market on the long-term interbank systemic risk.(3)As the average degree of the short-term market network increases,the interbank systemic risk presents a diminishing characteristic on the whole.As the average degree of the long-term market network increases,the short-term and total interbank systemic risk are generally decreasing,while the long-term systemic risk changes slowly and at a lower level.Based on the theory of multilayer network,this paper simulates the systemic risk in banking and aims to reveal the rule and mechanism of interbank market risk contagion.It provides a feasible analytical tool for financial regulators to better measure the interbank systemic risk,which is conducive to the healthy development of the banking industry and the maintenance of financial stability.