Systemic risk can spread rapidly through interconnected financial markets, where a default at a single institution can trigger a domino effect across the wider economy through multiple Contagion Channels.
The Interbank Gridlock Matrix
[Primary SIFI Defaults] 
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           v
[Wipes Out Outstanding Interbank Claims] ---> Triggers liquidity shortages at counterparty banks
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           v
[Asset Fire Sales Activated to Raise Cash] --> Depresses asset valuations across the sector
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           v
[Systemic Credit Crunch Realized] -----------> Direct contraction of real economy lending pipelines

Macroprudential teams use network modeling to map and analyze these interbank vulnerabilities, calculating the financial impact of simulated defaults to help authorities target interventions and isolate failures before they trigger a wider collapse.
 
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