Connectivity and Systemic Risk in the Brazilian National Payments System

We analyze a unique dataset, with funds transfers processed by the Brazilian Payments System, using network theory concepts. The analyses show that there is a subset of financial institutions acting as money centers. The local importance of the financial institutions is moderately concentrated and increased between 2006 and 2011. We also analyze the impact the default of institutions cause on their neighborhood and find the possible contagion paths within the banking system. The contagion paths change over time, but the central institutions remain the same. These locally central institutions, most of times, are also the systemically most central ones, when considered the entire financial system impact their default provoke. The analyses performed and their results summarize information on the network structure and on its central institutions. This information is relevant for monitoring a payments system.