The determinants of the individual nestedness contribution in financial systems

¹ Research Department, Central Bank of Brazil - Setor Bancário Sul Q. 3 Bloco B, Asa Sul, Brasília, DF, Brazil
² Department of Economics, University of São Paulo, Brazil - Av. Prof. Luciano Gualberto 908, São Paulo, SP, Brazil
³ Institute of Mathematics and Computer Science, University of São Paulo, Brazil - Av. Trab. São Carlense 400, São Carlos, SP, Brazil
⁴ Universidade Católica de Brasília - QS 07, Lote 01 EPCT, Brasília, DF, Brazil

^(a) E-mail: michel.alsilva@gmail.com (corresponding author)

Received: 5 September 2022
Accepted: 8 February 2023

Abstract

Nestedness is one of the most pervasive and studied patterns observed in complex networks and refers to a hierarchical organization of the network. In this paper, we assess the determinants of the individual nestedness contribution (INC) in financial systems. To perform this task, we rely on data from two Brazilian financial networks: the bank-firm credit network and the interbank network. We computed the nestedness of the networks, as well as the INC for each node. The main determinants of the INC in the bank-firm network are the degree and the core number. In the interbank network, the INC of lending banks is mainly driven by their degree, while the INC of borrowing banks has not a clear main determinant.