The organization of the interbank network and how ECB unconventional measures affected the e-MID overnight market

Abstract

The topological properties of interbank networks have been discussed widely in the literature mainly because of their relevance for systemic risk. Here we propose to use the Stochastic Block Model to investigate and perform a model selection among several possible two block organizations of the network: these include bipartite, core-periphery, and modular structures. We apply our method to the e-MID interbank market in the period 2010-2014 and we show that in normal conditions the most likely network organization is a bipartite structure. In exceptional conditions, such as after LTRO, one of the most important unconventional measures by ECB at the beginning of 2012, the most likely structure becomes a random one and only in 2014 the e-MID market went back to a normal bipartite organization. By investigating the strategy of individual banks, we explore possible explanations and we show that the disappearance of many lending banks and the strategy switch of a very small set of banks from borrower to lender is likely at the origin of this structural change.

33 pages, 5 figures

References in corpus (5)

• Stochastic blockmodels and community structure in networks
• Core-periphery organization of complex networks
• Parsimonious module inference in large networks
• Identification of core-periphery structure in networks
• Disentangling bipartite and core-periphery structure in financial networks

Cited by in corpus (8)

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• Loan maturity aggregation in interbank lending networks obscures mesoscale structure and economic functions
• Interbank network reconstruction enforcing density and reciprocity