Finnish interbank market at risk of contagion from middle-sized banks.
The study looked at the risk of financial contagion in the Finnish interbank market from 2005 to 2007. By using a method called maximum entropy, the researchers found that five out of ten deposit banks could trigger contagious effects. Both big and medium-sized banks can cause damaging chain reactions. Compared to the early 1990s, the negative impact of contagion on the Finnish banking sector has been less severe in recent years. Currently, the likelihood of contagion in the Finnish interbank market is low.