Systemic risk in banking ecosystems

Nature. 2011 Jan 20;469(7330):351-5. doi: 10.1038/nature09659.


In the run-up to the recent financial crisis, an increasingly elaborate set of financial instruments emerged, intended to optimize returns to individual institutions with seemingly minimal risk. Essentially no attention was given to their possible effects on the stability of the system as a whole. Drawing analogies with the dynamics of ecological food webs and with networks within which infectious diseases spread, we explore the interplay between complexity and stability in deliberately simplified models of financial networks. We suggest some policy lessons that can be drawn from such models, with the explicit aim of minimizing systemic risk.

MeSH terms

  • Biological Evolution
  • Commerce / economics*
  • Commerce / legislation & jurisprudence
  • Communicable Diseases / transmission
  • Economic Recession / statistics & numerical data
  • Ecosystem*
  • Financial Management / legislation & jurisprudence
  • Financial Management / methods*
  • Food Chain
  • Humans
  • Models, Biological*
  • Models, Economic*
  • Public Policy / legislation & jurisprudence
  • Risk Factors
  • Risk Management / legislation & jurisprudence
  • Risk Management / methods*
  • United States