Abstract The occurrence of systemic financial risk is a process of systemic structural reconstruction of the financial system in response to a shock. From a complex network perspective, the characteristics of the network nodes and the links between them determine the extent of financial risk accumulation and the size of the risk released when the structure of the financial system is rebuilt. This paper develops a complex network model of the banking system containing direct shocks, interbank market contagion, and common asset contagion of banking institutions with two insolvency scenarios of illiquidity and insolvency. The relationship between the network node characteristics of the average leverage of the banking institutions, the characteristics of the edges of the network of the average connectivity strength of the interbank market, the average connectivity strength of the banks’ external assets, and the accumulation of risk in the financial system are investigated. Our study finds the following: (1) The higher the average leverage, the higher the risk accumulation. (2) The higher the average connection strength in the interbank market, the higher the degree of risk accumulation. (3) The stronger the average connectivity strength of a banking institution’s external assets, the higher the risk accumulation. (4) When the level of risk accumulation in the financial system is low, the system may absorb external risks, leading to an increase in risk accumulation. (5) When the level of risk accumulation is high, management can adjust regulatory policies to release accumulated risks in an orderly manner, thereby reducing the level of risk accumulation in the financial system.
Yao et al. (2026) studied this question.