The Epidemiology of Banking Crises: a historical and empirical approach:Banking systems are social and financial networks operating in a broad economic and social ecosystem. Recently, the concept of epidemiological 'contagion' in international banking and financial markets has gained popularity as a metaphor of the way a solvency crisis in one institution is transmitted to others through mechanisms such as depositor anxiety, liquidity bail-outs, cross directorships or insider lending (Peckham 2014). However, explicit models of higher frequency bank level data has thus far been limited by a lack of appropriate data, and published analyses have concentrated on simplified models of both disease networks and financial networks (Haldane and May 2011). Nevertheless, explicit models are critical if we are to evaluate the utility of the epidemiological modelling paradigm for banks.
In this project, highly textured institutional quantitative and qualitative data available from the archives of banks and regulators will be linked to bespoke epidemiological models to generate step change insights regarding the ecosystems of international banking. Such an approach offers an opportunity for fresh methodological innovation as well as revising our understanding of how these highly complex social networks operate, by testing out the ways that crisis and 'disease' are transmitted among populations of institutions and redefining thresholds of ex ante 'healthy' and 'unhealthy' populations.