Abstract
Research background: The global banking network has been undergoing structural changes since the recent financial crisis. Previous studies on connectedness of global banking network during post-crisis period revealed the trends of regionalization and segmentation. Our previous research has also shown that during post-crisis period the level of regionalization within the EU banking network has increased; the network became more clustered and more decentralized. This paper continues our research of structural changes of EU banking network during post-crisis period by adding a global context and questioning the connectedness of EU banking network within global banking system.
 Purpose of the article: The aim of the paper is to evaluate the EU banking network?s connectedness in the global context during the post-crisis period.
 Methods: network analysis method and data on yearly flows of BIS bilateral interbank cross-border claim were used to evaluate the connectedness of global and EU banking systems.
 Findings & Value added: Evaluation of the global banking network?s connected-ness revealed that global banking network density decreased by 4.50 %, suggesting that connectedness is decreasing, but it is happening slowly. Structural changes in the global banking network did happen during post-crisis period with regards to out-degree, betweenness and closeness centrality indicators. In the global context, the EU banking network became more connected during post-crisis period. The EU banking network was regionalized in 2011, but this regionalization disappeared in 2015, as the level of intraregional density decreased in 2015 and became lower than the interregional density. This research contributes to previous research in a way that it applies intraregional and interregional network density measures for evaluation of the EU banking network?s connectedness, and analyses it as a subset of the global banking network.
Highlights
The financial crisis of 2007–2008 has revealed the importance of banking system in the financial system and the weaknesses of highly connected networks, i.e. how failures are transmitted from one entity of the system to another and contagious defaults of banks has threatened the stability of the entire financial system
Whether the global banking system’s connectedness will succeed or fail depends on many factors, such as the structure and characteristics of the system (Ho et al, 2013; Čihák et al, 2011), the nature of interactions among members of network (Caccioli et al, 2013; Philippas et al, 2015). It was extensively argued in previous research that the connectedness within the global banking network has decreased since the last financial crisis of 2007–2008 and cross-border banking claims have not increased significantly during the recovery of the economy (Bremus & Fratzscher, 2015)
An evaluation of the EU and global banking network connectedness during the post-crisis period was performed for a total of 37 countries using network analysis methodology and Bank of International Settlements (BIS) bilateral interbank crossborder claim yearly flows data
Summary
The financial crisis of 2007–2008 has revealed the importance of banking system in the financial system and the weaknesses of highly connected networks, i.e. how failures are transmitted from one entity of the system to another and contagious defaults of banks has threatened the stability of the entire financial system. Whether the global banking system’s connectedness will succeed or fail depends on many factors, such as the structure and characteristics of the system (Ho et al, 2013; Čihák et al, 2011), the nature of interactions among members of network (Caccioli et al, 2013; Philippas et al, 2015) It was extensively argued in previous research that the connectedness within the global banking network has decreased since the last financial crisis of 2007–2008 and cross-border banking claims have not increased significantly during the recovery of the economy (Bremus & Fratzscher, 2015). Since cross-border claims are considered riskier than domestic claims (Bremus & Fratzscher, 2015), it may be meaningful to withdraw assets from international markets in order to limit risks and the spread of contagion within the banking network
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