Major Swedish banks at centre of closely interconnected financial network
News, Economic Commentaries In a new Economic Commentary, the authors describe how Swedish credit institutions are interconnected through their bilateral exposures. The authors’ analysis shows that the Swedish banking system is a concentrated network with the largest banks playing a central role and channelling exposures, which can increase the risk that financial shocks may propagate rapidly.
The new Economic Commentary “Mapping the interconnectedness of Swedish credit institutions – domestic exposures”, written by Marianna Blix Grimaldi, Lukas Guan Hallquist, Jieying Li, Samuel Namér and Anna Seim, visualises how Swedish credit institutions are connected to each other through large exposures, based on COREP-(Common Reporting) data. By illustrating the bilateral links, a clear pattern emerges: the major Swedish banks play a central role and act as important intermediaries in a concentrated network of exposures.
The analysis shows that the interconnectedness is mainly driven by debt exposures, in particular the banks’ holdings of one another’s covered bonds. This means that several institutions are dependent on the same central actors, which can amplify the propagation of financial shocks in the system.
The combination of high network density and concentrated dependencies means that shocks can spread quickly between banks. At the same time, the analysis shows that the Swedish banking system exhibits considerable complexity and variation, with different types of exposures and relationships affecting how risks are distributed and can be further spread.
The Economic Commentary is a first step in a broader research project on financial interconnectedness. Future analyses will include foreign exposures and an in-depth quantification of potential contagion risks within the Swedish banking system.
About the Economic Commentaries
The Riksbank's Economic Commentaries contain, for instance, short analyses and debate articles. The opinions expressed in Economic Commentaries are those of the authors and are not to be seen as the Riksbank's view.