News and Networks: Using Text Analytics to Assess Bank Networks During COVID-19 Crisis

52 Pages Posted: 30 Mar 2021 Last revised: 9 Sep 2021

See all articles by Sophia Kazinnik

Sophia Kazinnik

Federal Reserve Banks - Quantitative Supervision & Research

Cooper Killen

Quantitative Supervision and Research - Federal Reserve Bank of Richmond

Daniela Scida

Quantitative Supervision and Research - Federal Reserve Bank of Richmond

John Wu

Federal Reserve Banks - Quantitative Supervision & Research

Date Written: March 29, 2021

Abstract

We study the 'interconnectedness' of stress-tested banks by exploiting how they are mentioned together in the context of financial news. We start by constructing weekly co-occurrence network matrices following Ronnqvist and Sarlin (2015) text-to-network approach. Using the COVID-19 pandemic as an external shock, we examine how bank networks behave during high stress periods. We find that banks become more interconnected during peaks of COVID-19 induced stress. We put forth a new measure of systemic risk that utilizes text-based eigenvector centrality. This measure provides a more stable ranking system than the traditional SRISK measure during both high and low stress periods.

Keywords: Bank Networks, Text Analysis, Systemic Risk, COVID-19, Financial Stability

JEL Classification: G1, D85, L14, G20, G32, G38

Suggested Citation

Kazinnik, Sophia and Killen, Cooper and Scida, Daniela and Wu, John, News and Networks: Using Text Analytics to Assess Bank Networks During COVID-19 Crisis (March 29, 2021). Available at SSRN: https://ssrn.com/abstract=3815250 or http://dx.doi.org/10.2139/ssrn.3815250

Sophia Kazinnik

Federal Reserve Banks - Quantitative Supervision & Research ( email )

United States

Cooper Killen

Quantitative Supervision and Research - Federal Reserve Bank of Richmond ( email )

P.O. Box 27622
Richmond, VA 23261
United States

Daniela Scida (Contact Author)

Quantitative Supervision and Research - Federal Reserve Bank of Richmond ( email )

Charlotte, NC
United States

John Wu

Federal Reserve Banks - Quantitative Supervision & Research ( email )

United States

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