The Network Topology of the Interbank Market

TL;DR

This paper empirically analyzes the Austrian interbank market network, revealing power law distributions, community structures aligned with regional and sectoral organization, and typical complex network features, contrasting with prior theoretical models.

Contribution

It provides the first detailed empirical network analysis of the Austrian interbank market, uncovering structural features and community organization not captured by existing theoretical models.

Findings

Contract size distribution follows a power law over three decades.

Community structure mirrors regional and sectoral organization.

Network exhibits typical complex network features like low clustering and short path length.

Abstract

We provide an empirical analysis of the network structure of the Austrian interbank market based on a unique data set of the Oesterreichische Nationalbank (OeNB). We show that the contract size distribution follows a power law over more than 3 decades. By using a novel ''dissimilarity'' measure we find that the interbank network shows a community structure that exactly mirrors the regional and sectoral organization of the actual Austrian banking system. The degree distribution of the interbank network shows two different power law exponents which are one-to-one related to two sub-network structures, differing in the degree of hierarchical organization. The banking network moreover shares typical structural features known in numerous complex real world networks: a low clustering coefficient and a relatively short average shortest path length. These empirical findings are in marked contrast to interbank networks that have been analyzed in the theoretical economic and econo-physics literature.