Multilayer network reveals Italian financial system interconnections

The study constructs a novel dataset combining granular supervisory sources like AnaCredit and Solvency II to model the Italian financial system as a twelve-layer network from 2019 to 2025.

By integrating loans, equities, bonds, and fund shares across banks, insurers, and investment funds, the paper uncovers hidden cross-sector dependencies.

The aggregated network reveals a bank-centred core characterized by high connectivity and structural dominance, surrounded by an intermediate layer of insurers acting as bridge connectors and a broad, fragmented periphery of investment funds.

Cross-sectoral linkages expanded significantly, accounting for approximately 70 percent of all connections by 2025, up from 58 percent in 2019, highlighting key channels for systemic shock transmission.

Major banking and insurance consolidation events between 2019 and 2025, including prominent mergers like Intesa Sanpaolo's integration of UBI Banca and Unipol's corporate streamlining, reduced the total number of banking and insurance nodes while concentrating exposures among remaining institutions.

Despite these structural shifts, the system exhibits persistent small-world properties with short average path lengths and sparse density.

This topological configuration implies that financial distress can propagate rapidly across institutions through mark-to-market losses and funding pressures.