Extending Maximum-Entropy Interbank Reconstruction to a Multi-Country Framework with Cross-Border Exposures
Estimating bilateral interbank exposures is essential for assessing systemic risk and contagion in global banking systems. We propose a reconstruction framework that extends the maximum-entropy approach to a multi-country setting by integrating domestic balance-sheet total interbank exposure values with country-level aggregate cross-border exposures. The method distributes each country’s external positions across its resident banks and then reconstructs the domestic interbank matrices under maximum-entropy constraints, yielding a globally consistent exposure matrix. Cross-border aggregates—such as those published by the BIS—enter the framework only as optional external constraints rather than as objects of empirical validation. The resulting dual-layer interbank network improves the internal coherence of multi-country exposure estimates and provides a consistent input for contagion simulations and systemic risk analysis.
Authors
- Guo Pin (ORCID: https://orcid.org/0000-0001-8202-7335)
- Simone Sbaraglia (ORCID: https://orcid.org/0000-0003-2421-2801)
- Stefano Zedda (ORCID: https://orcid.org/0000-0002-3663-8028)
Institutions
- University of Cagliari (IT)
- Xi'an Jiaotong University (CN)
Publication Details
- Journal
- Journal of risk and financial management
- Published
- 2026-02-13
- DOI
- https://doi.org/10.3390/jrfm19020140
- Primary Topic
- Banking stability, regulation, efficiency
- Type
- article
- Field-Weighted Citation Impact
- 0.00