## Bank Network Analysis in the ECCU

_IMF Working Papers, July 12, 2018_

## Source details

**Canonical URL:** [Bank Network Analysis in the ECCU](https://www.imf.org/en/publications/wp/issues/2018/07/12/bank-network-analysis-in-the-eccu-46066)

## Other formats

- [Markdown version](/en/publications/wp/issues/2018/07/12/bank-network-analysis-in-the-eccu-46066/index.md)
- [Structured JSON version](/en/publications/wp/issues/2018/07/12/bank-network-analysis-in-the-eccu-46066/index.json)
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## Bibliographic details
- Authors: Balazs Csonto, Alejandro D Guerson, Alla Myrvoda, Emefa Sewordor
- Published: July 12, 2018
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781484367506.001

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### Objective and scope
- Applies network analysis to assess the extent of systemic vulnerabilities in the ECCU banking system.
- Uses two sets of illustrative stress tests:
  - Solvency and liquidity shocks to each individual bank and the impact on other banks in the network through their bilateral net asset exposures.
  - Country and region-wide tail shocks to GDP affecting capital and liquidity of all banks in the shocked jurisdictions, followed by the rippling effects through the regional network.

### Methodology and scenarios
- Network analysis based on bilateral net asset exposures among banks.
- Stress-test scenarios:
  - Individual-bank solvency and liquidity shocks and subsequent propagation via bilateral exposures.
  - Jurisdiction-level and region-wide tail GDP shocks affecting bank capital and liquidity, with subsequent network spillovers.

### Key findings and interpretations
- The analysis identifies systemic institutions that merit heightened attention by the regulator.
- Systemic importance is determined by:
  - The degree of connectivity with the rest of the system.
  - The extent to which an institution is vulnerable to the failure of other banks.
- Illustrative stress tests show that both direct bilateral exposures and economy-wide tail shocks can generate rippling effects across the regional banking network.

### Policy implications and recommendations
- Regulators should monitor institutions with high connectivity within the network more closely due to their potential to propagate shocks.
- Supervisory attention should consider both:
  - Direct bilateral exposure channels among banks.
  - Indirect channels arising from common exposure to jurisdictional GDP shocks that affect capital and liquidity across banks.

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## Content in this bundle

- **Bank Network Analysis in the ECCU, WP/18/162, July 2018**
  - [Bank Network Analysis in the ECCU, WP/18/162, July 2018 (Markdown version)](/-/media/files/publications/wp/2018/wp18162.pdf.md){rel="alternate" type="text/markdown"}
  - [Bank Network Analysis in the ECCU, WP/18/162, July 2018 (PDF)](/-/media/files/publications/wp/2018/wp18162.pdf){rel="external" type="application/pdf"}

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_Source: https://www.imf.org/en/publications/wp/issues/2018/07/12/bank-network-analysis-in-the-eccu-46066_