During the 2008 financial crisis, many banks ran into difficulties at the same time as shocks spread rapidly across the financial system. One of the main reasons for this was that the global financial system had become highly interconnected.
Measure bank interconnectedness and associated systemic risk in the UK.
Direct interconnectedness such as interbank credit exposures, have decreased materially since the financial crisis. On the other hand, indirect interconnectedness such as correlations in banks’ CDS premia remain elevated. The analysis helps to define the case for policy interventions to reduce the associated risks.
- Bank of England: Banking sector interconnectedness: what is it, how can we measure it and why does it matter? (PDF)
- Bank of England: The sterling unsecured loan market during 2006–08 (PDF)
- Research paper: Interbank Exposure Networks (PDF)