The Global Risks Alliance (GRA)
Financial institutions are linked by loans, deposits, derivatives, securities holdings, common service providers and shared investors. These links spread risk in calm times and transmit losses in stress. Systemic interconnectedness is the property that lets one failure become many. This page sets out how interconnectedness develops and transmits stress, how it is measured, and which authorities and boards use that evidence.
GRA · In development · service level R0
Systemic interconnectedness is the web of exposures, common holdings and shared infrastructure that links financial institutions and lets distress at one spread to others. It is measured with exposure data, portfolio overlap and network models. Supervisors, macroprudential authorities and boards use that evidence.
How a failure at one financial centre can spread through settlement links. Design links, not real dependencies.
The working screen behind this subject: its structure, terms and states. Names are placeholders and values illustrative.
Systemic interconnectedness · Financial system · Committee meeting 3
percentile vs history, 0 to 100
red: most connected node
Banks, insurers and nonbanks linked through exposures. The dossier below sets out how the risk develops, what is measured, where the data come from, how it is modelled and who decides.
When a counterparty defaults, its creditors lose. Concentrated bilateral exposures, in interbank loans or derivatives, can push a creditor below its capital buffer and start a chain.
Institutions that hold the same assets or lend to the same sectors lose together even without direct links. Diversification at firm level can produce uniformity at system level.
Central counterparties, custodians, cloud providers and payment systems serve many firms. A failure at one node affects all its users at once.
When counterparties cannot see each other's exposures, rumours of losses lead to withdrawal from all suspected firms. Uncertainty about links acts like contagion even where links are small.
Each term as this page uses it. Where a standard-setting body defines the term, the wording follows that body.
| Term | Definition |
|---|---|
| Global systemically important bank | A bank whose distress would disrupt the global financial system, identified annually by the FSB using BCBS indicators. |
| Common exposure | Holdings of the same or similar assets by several institutions, which makes their losses move together. |
| Network centrality | A measure of how important a node is to a network's connectivity, used to find institutions through which losses would spread. |
Each indicator carries its unit, its cadence, the kind of source behind it and the evidence label a value would carry. No values are shown: a programme supplies them under its own authority.
| Indicator | Unit | Cadence | Source type | Label |
|---|---|---|---|---|
| Interbank exposures | currency, by counterparty sector | quarterly | Supervisory large exposure returns | OFFICIAL |
| G-SIB interconnectedness score | score from intra-financial assets and liabilities and securities outstanding | annual | BCBS G-SIB assessment data | OFFICIAL |
| Network centrality of institutions | centrality measure, dimensionless | quarterly | Exposure networks | MODELLED |
| Portfolio overlap between institutions | cosine similarity of holdings | quarterly | Securities holdings statistics | ESTIMATED |
| Bank claims on nonbank financial institutions | currency | quarterly | BIS and central bank statistics | OFFICIAL |
| Concentration of critical service providers | share of firms using top providers | annual | Supervisory surveys | REPORTED |
The topic as a computational graph: named sources feed the methods, an evidence review gates the outputs, and the decisions stay with the authorities that hold them.
Fig. 02Nodes carry their type, two metric rows and a state; connectors show what feeds what; dashed frames name the owners; the timeline is the cadence. Design of the pipeline, not a record of a run.
Named public datasets and institutional records, each with its licence class. Sources by agreement are used only under their terms and never republished.
| Source | What it gives | Licence class |
|---|---|---|
| BCBS G-SIB assessment sample data | Indicator values used in the G-SIB methodology | Free, BIS terms |
| BIS international banking statistics | Cross-border bank claims by sector and country | Free, BIS terms |
| ECB securities holdings statistics | Holdings of securities by sector in the euro area | Free, ECB reuse terms |
| FFIEC Consolidated Reports of Condition and Income (Call Reports) | United States bank balance sheets | Public domain |
| IMF Global Financial Stability Report | Assessment of system-wide vulnerabilities | Free, IMF terms |
| Office of Financial Research financial stability monitor | Indicators of United States financial stability | Public domain |
Financial Stability prepares evidence. The decisions below are taken by the authorities named, under their own rules, and never by the platform.
| Who decides | The question | Evidence this page serves |
|---|---|---|
| Prudential supervisors | Which exposures need large exposure limits or extra capital | Exposure data and network measures with sources |
| Macroprudential authorities | Whether interconnectedness justifies systemic buffers | System-wide exposure and overlap measures |
| Bank and insurer boards | How much concentration to accept in counterparties and providers | Counterparty and provider dependence evidence |
| The Basel Committee and FSB | How the G-SIB framework and lists are set | Indicator data and methodology reviews |
Who is exposed to whom, through which instruments, and how concentrated the links are.
Which nodes, if they failed, would affect the most others.
When links share risk and when they spread it.
Indirect connections through common holdings, shared providers and correlated strategies.
Network research shows that connectivity has two faces. In normal conditions, links diversify risk and absorb small shocks. Beyond a threshold, the same links transmit large shocks widely, a property sometimes described as robust yet fragile.
Central institutions matter disproportionately. Large dealers, clearing houses and major funding providers sit at the core of many networks; their distress affects many counterparties at once.
Indirect links can exceed direct ones. Institutions that hold similar assets are connected through prices even with no bilateral exposure: if one sells, the others lose.
Shared service providers, such as custodians, cloud platforms and data vendors, create operational links that do not appear in financial exposure data.
Networks change in stress. Counterparties cut links precisely when they are needed, which can isolate institutions and accelerate failure.
| Method or data | What it shows | Its limit |
|---|---|---|
| Exposure network data | Bilateral links between institutions | Often confidential and incomplete |
| Common holdings analysis | Overlap in portfolios | Holdings data may lag |
| Network metrics | Centrality and concentration | Metrics simplify complex behaviour |
| Simulation | Contagion under assumed shocks | Results depend on behavioural assumptions |
The current service level is R0: information and enquiries. An enquiry receives a reference and names the next step; applications, payments, compute allocations and registrations open only when their team, terms and review capacity exist.