European Central Bank publishes research finding banks dominate euro area financial networks except in Cyprus Ireland Luxembourg and Malta

The European Central Bank has published a working paper by Antonio Sánchez Serrano that maps cross-sector financial exposures across the 20 euro area economies using who-to-whom data for the fourth quarter of 2024. The paper, which does not represent ECB views, finds that banks sit at the core of national financial networks in most euro area countries. Cyprus, Ireland, Luxembourg and Malta are the main exceptions, where investment funds and other financial institutions are more central and are linked far more strongly to the rest of the world than to domestic sectors. The analysis is based on quarterly sectoral accounts and sectoral balance sheet data covering exposures through listed shares, debt securities, deposits and loans. It finds substantial similarity across the other 16 euro area country networks, with Spain, Austria, Portugal and Germany showing the closest resemblance. In most countries, the network structure splits into two communities, one centred on banks and the real economy, including households and non-financial corporations, and another centred on non-bank financial intermediaries and the rest of the world. The paper also notes that pension funds appear less likely to transmit shocks, while some small sectors, including money market funds and insurance corporations, could act as shock transmitters in some countries, although that would need to be tested through balance sheet vulnerability analysis or a full contagion model.