Risk transmission, systemic fragility of banks’ interacting customers and credit worthiness assessment

Abstract

The analysis of monetary flows’ correlation resulting from clients’ mutual transactions is crucial for small/local banks in assessing customers’ creditworthiness. This paper offers a new method based on a complex network (customers are the nodes and their mutual financial flows the links). We detect the presence of vulnerable and dangerous clients within the contagion and propagation of external shocks mechanisms and exploit the informative content of the in- and out-paths of the network, with specific reference to those associated with the geodesic patterns. We test the model over a high-quality dataset referred to 2021. The results might support banks’ customers’ creditworthiness analysis.