What is it about?

With the aim to measure and monitor systemic risk, we present some topological metrics for the interbank exposures and the payments system networks. The evolution of such networks is analyzed, we draw important conclusions from the systemic risk's perspective and propose a measure of interconnectedness. Additionally, we suggest non-topological measures to describe individual behavior of banks in both networks. The main findings of this paper are: the structures of the payments and exposures networks are different (in terms of connectivity); the topology of the exposures network changed after the collapse of Lehman Brothers, whereas the structure of the payments network does not; the proposed measure of interconnectedness can be used to determine the importance of a bank in terms of connectivity. Finally, we found that interconnectedness of a bank, is not necessarily related with its assets size but it is linked to the contagion it might cause.

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Why is it important?

We propose an interconnectedness measure from systemic perspective taken into consideration the bilateral relationships observed at the interbank market and those between direct participants in the Large Value Payment System in Mexico. In terms of connectivity we find different network structures regarding payments sending and interbank exposures. Further, after the collapse of Lehman Brothers, the topology of the exposures network changed, whereas the payments network does not.


The network-driven metric developed in this paper assesses bank risk exposure from broader perspective. It allows policy maker to rank financial institutions under novel interconnectedness criteria. Network-based measures should be incorporated into the existing assessments of the financial sector for more accurate risk valuations.

Dr Biliana Alexandrova-Kabadjova
Banco de Mexico

Read the Original

This page is a summary of: An empirical study of the Mexican banking system’s network and its implications for systemic risk, Journal of Economic Dynamics and Control, March 2014, Elsevier,
DOI: 10.1016/j.jedc.2014.01.009.
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