<abstract xmlns="http://www.w3.org/1999/xhtml">

<p>The objective of this research is to examine the inter-bank network of clients as a channel for credit risk transmission by groups of banks in Serbia characterized by different levels of credit risk (clusters). Two of the four observed groups of banks have experienced increase in NPLs through the channel of contagion spread in the interbank network. The spread of the infection through the banking network is a consequence of the impact of the economic connection among clients. The third group of banks (banks with high levels of credit risk) takes over the effects of systemic factors and transfers their influence to the second and the first group (banks with average and below-average credit risk level) through the banking network channel. There were different models of bank behaviour, from a group of banks that fully aligned their risk taking with risk capacity to a group of banks that exhibited an excessive risk propensity far beyond their own risk-taking capacity. There is also the confirmation that moral hazard was an important determinant of credit risk and an additional impulse to spread credit contagion.</p>
</abstract>

The objective of this research is to examine the inter-bank network of clients as a channel for credit risk transmission by groups of banks in Serbia characterized by different levels of credit risk (clusters). Two of the four observed groups of banks have experienced increase in NPLs through the channel of contagion spread in the interbank network. The spread of the infection through the banking network is a consequence of the impact of the economic connection among clients. The third group of banks (banks with high levels of credit risk) takes over the effects of systemic factors and transfers their influence to the second and the first group (banks with average and below-average credit risk level) through the banking network channel. There were different models of bank behaviour, from a group of banks that fully aligned their risk taking with risk capacity to a group of banks that exhibited an excessive risk propensity far beyond their own risk-taking capacity. There is also the confirmation that moral hazard was an important determinant of credit risk and an additional impulse to spread credit contagion.

Interbank Network as a Channel of Credit Contagion in Banks: Is Moral Hazard Transferable?

National bank of Serbia and University of Belgrade

Journal of Central Banking Theory and Practice

This work is licensed under the Creative Commons Attribution 4.0 International License.

The objective of this research is to examine the inter-bank network of clients as a channel for credit risk transmission by groups of banks in Serbia...

Interbank Network as a Channel of Credit Contagion in Banks: Is Moral Hazard Transferable?

Published Online: Sep 23, 2022

Page range: 117 - 135

Received: Aug 14, 2021

Accepted: Nov 29, 2021

DOI: https://doi.org/10.2478/jcbtp-2022-0026

Keywords
Credit Contagion, Interbank Network, Economic Connection, Moral Hazard, NPL

© 2022 Željko Jović et al., published by Sciendo

This work is licensed under the Creative Commons Attribution 4.0 International License.

Interbank Network as a Channel of Credit Contagion in Banks: Is Moral Hazard Transferable?

Published Online: Sep 23, 2022

Page range: 117 - 135

Received: Aug 14, 2021

Accepted: Nov 29, 2021

DOI: https://doi.org/10.2478/jcbtp-2022-0026

KeywordsCredit Contagion, Interbank Network, Economic Connection, Moral Hazard, NPL

© 2022 Željko Jović et al., published by Sciendo

This work is licensed under the Creative Commons Attribution 4.0 International License.

Keywords
Credit Contagion, Interbank Network, Economic Connection, Moral Hazard, NPL