Network analysis can create a clearer picture of how systemic risk emerges from banks’ interactions with one another, research published by the Bank of England finds.

Mattia Montagna, Gabriele Torri and Giovanni Covi say the issue of systemic risk is critical to the work of central banks but remains “difficult to measure and quantify”. Time series methods struggle to capture risks, they say, partly because the series are “highly correlated and non-stationary”, and partly because there is