# Social dynamics of financial networks

## TL;DR

This paper uncovers fundamental daily transaction patterns in interbank networks, revealing social-like dynamics that can improve systemic risk assessment and real-time financial stability management.

## Contribution

It identifies stable interaction patterns in interbank networks and introduces a simple model to generate synthetic networks with similar dynamical properties.

## Key findings

- Stable interaction patterns between banks were identified.
- Interbank network dynamics share characteristics with social communication.
- A simple model reproduces observed network dynamics.

## Abstract

The global financial crisis in 2007-2009 demonstrated that systemic risk can spread all over the world through a complex web of financial linkages, yet we still lack fundamental knowledge about the evolution of the financial web. In particular, interbank credit networks shape the core of the financial system, in which a time-varying interconnected risk emerges from a massive number of temporal transactions between banks. The current lack of understanding of the mechanics of interbank networks makes it difficult to evaluate and control systemic risk. Here, we uncover fundamental dynamics of interbank networks by seeking the patterns of daily transactions between individual banks. We find stable interaction patterns between banks from which distinctive network-scale dynamics emerge. In fact, the dynamical patterns discovered at the local and network scales share common characteristics with social communication patterns of humans. To explain the origin of "social" dynamics in interbank networks, we provide a simple model that allows us to generate a sequence of synthetic daily networks characterized by the observed dynamical properties. The discovery of dynamical principles at the daily resolution will enhance our ability to assess systemic risk and could contribute to the real-time management of financial stability.