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Do Interconnections Matter for Bank Efficiency?

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  • Solange Maria Guerra
  • Benjamin Miranda Tabak
  • Rodrigo Cesar de Castro Miranda

Abstract

This paper addresses the issue of how individual bank interconnectivity and the interbank network topology impact on Brazilian banking efficiency between 2007 and 2013. We use several network measures to analyze the effects of bank interconnections on cost, profit and risk-taking efficiency. The results suggest that interconnections matter for bank efficiency. We find that interconnectivity can increase cost and risk-taking inefficiency levels. We also find that the density of the network topology can reduce profit and risk-taking inefficiency levels.

Suggested Citation

  • Solange Maria Guerra & Benjamin Miranda Tabak & Rodrigo Cesar de Castro Miranda, 2014. "Do Interconnections Matter for Bank Efficiency?," Working Papers Series 374, Central Bank of Brazil, Research Department.
    • Handle: RePEc:bcb:wpaper:374
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    References listed on IDEAS

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    Cited by:

    1. Thiago Christiano Silva & Marcos Soares da Silva & Benjamin Miranda Tabak, 2015. "Liquidity Performance Evaluation of the Brazilian Interbank Market using a Network-Based Approach," Working Papers Series 401, Central Bank of Brazil, Research Department.

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