Systemic failures frequently spread through interconnected networks of financial counterparty agreements. To monitor these risks, central bank research teams map Interbank Contagion Channels.

[Primary SIFI Defaults] ---> Wipes Out Interbank Claims ---> Secondary Liquidity Squeezes ---> Systemic Network Gridlock

Network models analyze asset and liability connections across the interbank market. If a Systemically Important Financial Institution (SIFI) defaults, the system calculates the immediate financial impact on counterparty capital positions, helping authorities target emergency liquidity interventions and prevent wider market failures.