Berlin 2005 – wissenschaftliches Programm

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AKSOE: Physik sozio-ökonomischer Systeme

AKSOE 8: Poster Session

AKSOE 8.9: Poster

Montag, 7. März 2005, 14:00–15:30, Poster TU E

Default probabilities in non-uniformly regulated banking networks — •Klaus Dragosits and Stefan Thurner — Compex Systems Research Group, HNO, Meduniwien, Währinger Gürtel 18-20,A-1090 Wien

The global financial market can be regarded as a pool of local (national) banking networks. Some global rules as the Basle Capital Accord have been established, still any local regulator is free to set stronger rules, and any participating bank may try to disobey the regulations (moral hazard) at least for a limited period of time.

By extending the properties of an established iterative risk-trading game, we investigate interactions between banks which are more or less strongly regulated. Our evaluation criterion is the stability of the resulting networks, which we benchmark by the default probability of the involved banks.

Aside from a profound analysis for various networks with different topologies and different ratios of regulated vs. unregulated banks, focus was put on a realistic real world set-up, where the most wealthy banks are stronger regulated (example is motivated by a recent proposal of Austrian local banks).

As expected, different topology-dependent transitions between totally regulated and totally unregulated networks are obtained. In our wealth-dependent setup we find a phase were the default risk in a non-uniformly regulated network is even higher than in a totally unregulated network, a result we consider of fundamental significance for network regulation.