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posted by janrinok on Thursday January 12 2017, @12:29PM   Printer-friendly
from the accountable-accountants dept.

Research on interbank networks and systemic importance is starting to recognise that the web of exposures linking banks' balance sheets is more complex than the single-layer-of-exposure approach suggests. We use data on exposures between large European banks, broken down by both maturity and instrument type, to characterise the main features of the multiplex (or multi-layered) structure of the network of large European banks. Banks that are well connected or important in one network, tend to also be well connected in other networks (i.e. the network features positively correlated multiplexity).

The different layers exhibit a high degree of similarity, stemming both from standard similarity analyses as well as a core-periphery analyses at the layer level. We propose measures of systemic importance that fit the case in which banks are connected through an arbitrary number of layers (be it by instrument, maturity or a combination of both). Such measures allow for a decomposition of the global systemic importance index for any bank into the contributions of each of the sub-networks, providing a potentially useful tool for banking regulators and supervisors in identifying tailored policy responses. We use the dataset of exposures between large European banks to illustrate that both the methodology and the specific level of network aggregation may matter both in the determination of interconnectedness and in the policy making process.

Source: Bank for International Settlements (BIS)

http://www.bis.org/publ/work603.pdf


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  • (Score: 2, Interesting) by Anonymous Coward on Thursday January 12 2017, @02:16PM

    by Anonymous Coward on Thursday January 12 2017, @02:16PM (#452940)

    That paper describes a system more complicated than I want to think about.

    Simple banking (just taking deposits and lending money) is complicated enough with lending between banks and interest and inflation fluctuations.
    Adding the construction of investment instruments on top of these makes it more complicated.
    Adding outright investing more so.
    Adding credit default swaps on top of that more so.
    I have not clue what else they do, but the goal is not to have to hear about it at some point in the future.

    It almost seems the goal of a banker is to make more and more deals instead of servicing his end customers.
    Perhaps he is paid by the deal instead of by the customer?

    This paper attempts to quantify the relationships between banks.
    I hope that it is able to unwind the risk in these relations.
    So that a risk doesn't magically look better on a bank's balance sheet as it is bundled and transferred between banks.
    That was the failure mode for the last banking crisis.

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  • (Score: 3, Informative) by Uncle_Al on Thursday January 12 2017, @03:05PM

    by Uncle_Al (1108) on Thursday January 12 2017, @03:05PM (#452946)

    to make money for the bank

    'service' to the customer is the same as a bull is of 'service' to the cow

  • (Score: 3, Insightful) by Unixnut on Thursday January 12 2017, @05:10PM

    by Unixnut (5779) on Thursday January 12 2017, @05:10PM (#452981)

    It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning. -- Henry Ford

    https://www.brainyquote.com/quotes/quotes/h/henryford136294.html [brainyquote.com]

    Lets just say it is in the interest of all those earning money off the system, to keep it as complicated, impenetrable and convoluted as possible. If it was simple, people would have no trouble seeing how they were being stiffed, and governments and regulators would find their jobs far easier when it comes to keeping socially destructive behaviour in check.

    • (Score: 1, Insightful) by Anonymous Coward on Thursday January 12 2017, @08:07PM

      by Anonymous Coward on Thursday January 12 2017, @08:07PM (#453040)

      Yup, why else would the tax code be longer than any one person could possibly hope to ever understand?

      • (Score: 0) by Anonymous Coward on Thursday January 12 2017, @09:09PM

        by Anonymous Coward on Thursday January 12 2017, @09:09PM (#453070)

        Same reason that the government doesn't use the information they have on you to fill out the forms for you. H+R Block and the other tax preparation services have their bribes in.

      • (Score: 3, Informative) by Thexalon on Thursday January 12 2017, @10:38PM

        by Thexalon (636) on Thursday January 12 2017, @10:38PM (#453101)

        Yup, why else would the tax code be longer than any one person could possibly hope to ever understand?

        Both of you are implying far more intelligence and planning that makes any sense.

        The confusing tax code can be adequately explained by: Rich people and/or the businesses they control buy off politicians to get tax breaks for themselves. The politicians, trying to hide this simple and obvious process from pesky voters and also trying to maximize their own profit, make their giveaways as specific and convoluted as possible so that they only get applied to the people who paid for them. Neither the rich people nor the politicians are thinking past their own immediate short-term profits.

        And I should point out that it's so confusing that even the IRS is years behind understanding what the rules actually are.

        --
        The inverse of "I told you so" is "Nobody could have predicted"