European Banking Network in Light of the Single Supervisory Mechanism from the Network Analysis Perspective

Mária Širaňová

Abstract

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.

Keywords

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

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https://doi.org/10.5817/FAI2015-1-2

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