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Systemic risk in banking ecosystems
Abstract
In the run-up to the recent financial crisis, an increasingly elaborate set of financial instruments emerged, intended to optimize returns to individual institutions with seemingly minimal risk. Essentially no attention was given to their possible effects on the stability of the system as a whole. Drawing analogies with the dynamics of ecological food webs and with networks within which infectious diseases spread, we explore the interplay between complexity and stability in deliberately simplified models of financial networks. We suggest some policy lessons that can be drawn from such models, with the explicit aim of minimizing systemic risk.
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“Both previous societal collapses and disasters in the modern world are marked more by the accumulation of many stresses leading to failure, rather than single abrupt shocks destroying systems (Homer-Dixon, 2008; Haldane and May, 2011; Helbing, 2013).”
From A Fate Worse Than Warming? Stratospheric Aerosol Injection and Global Catastrophic Risk (2021) · cites this paper as Haldane and May, 2011
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Metadata
- Authors
- Haldane, A. G., & May, R. M.
- Affiliations
- Bank of England (GB)
- University of Oxford (GB)
- Corresponding author
- May, Robert M.
- ORCID
- Haldane, Andrew G.
- Venue
- Nature
- Published
- 2011-01
- Volume
- 469
- Issue
- 7330
- Pages
- 351-355
- ISSN
- 0028-0836 (ISSN-L)
- 1476-4687
- OpenAlex
- W2037102228
- Cited by
- 1,480
- References
- 45
- Citations by year
- 2026: 113 · 2025: 76 · 2024: 78 · 2023: 63 · 2022: 61 · 2021: 93 · 2020: 122 · 2019: 106 · 2018: 95 · 2017: 106 · 2016: 111 · 2015: 109 · 2014: 125 · 2013: 109 · 2012: 63
- FWCI
- 204.22
- Type
- journal article
- Language
- en
- Open access
- closed
- Licence
- www.springer.com/tdm (tdm)
- Locations
- Nature (publishedVersion)
- PubMed (publishedVersion)
- RePEc: Research Papers in Economics (submittedVersion)
- Topics
- Social Sciences › Economics, Econometrics and Finance › Finance › Banking stability, regulation, efficiency
- Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Complex Systems and Time Series Analysis
- Physical Sciences › Physics and Astronomy › Statistical and Nonlinear Physics › Complex Network Analysis Techniques
- Keywords
- systemic risk, financial networks, banking sector, 2008 financial crisis, food web models, financial stability policy, financial instruments, network models
- MeSH terms
- Commerce, Communicable Diseases, Biological Evolution, Financial Management, Humans, Models, Biological, Public Policy, Risk Factors, Risk Management, United States, Ecosystem, Models, Economic, Food Chain, Economic Recession
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