“Too central to fail” instead of “too big to fail”: whether banks pose a risk to the financial system when they get into distress has more to do with their level of networking than with their size. Economic researchers at ETH Zurich have developed a method to deduce the “systemic importance” of banks from their complex connections within financial networks.
“Between 2008 and 2010 a total of 22 banks formed the innermost circle of the financial crisis. They were so intensely connected with each other through credit relationships, mutual equity investments and financial dependencies that the distress of any single one of them could endanger the entire financial system. [..]”
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