Driver Countries in Global Banking Network.

Area of Science:

• Economics
• International Finance
• Network Analysis

Background:

• The global banking network exhibits increasing interconnectedness, facilitating rapid financial crisis transmission.
• Understanding cross-border lending dynamics is crucial for financial stability.
• Core countries act as lenders, while peripheral countries are borrowers in this network.

Purpose of the Study:

• To analyze the evolution of the cross-border bank lending network from 1977 to 2018.
• To identify influential lending (core) countries and associated borrowing (peripheral) country clusters.
• To investigate the impact of financial crises on the roles of core countries and network structure.

Main Methods:

• Principal Component Analysis (PCA) was employed to identify core lending countries.
• Clustering techniques were used to group peripheral borrowing countries.
• Longitudinal analysis examined network changes over four decades.

Main Results:

• Three distinct clusters of peripheral countries were identified, with varying membership over time.
• Seven core countries (France, UK, US, Japan, Germany, Chinese Taipei, Switzerland) consistently played significant lending roles.
• Changes in core country influence and peripheral cluster composition were observed, potentially linked to financial events.

Conclusions:

• The study highlights the dynamic nature of the global banking network's core-periphery structure.
• Shifts in country roles underscore evolving international financial and political interactions.
• The findings provide insights into systemic risk propagation and network resilience.