Multilayer networks in finance: a systematic review

Abstract

<title>Abstract</title> Stress in the global financial system propagates through multiple channels, including interbank credit and funding, overlapping portfolios, and bank–firm exposures. Multilayer networks represent these channels as interdependent layers, enabling analysis of how shocks transmit and amplify within and across channels. Yet many studies collapse these channels into a single layer, and stress tests often examine channels in isolation, in both cases removing cross-channel feedback and understating systemic vulnerability. This can lead to inadequate capital and liquidity buffers, overly optimistic risk assessments, and poorly targeted interventions. The synthesis in this review shows how multilayer financial networks are constructed and quantifies how much single-layer proxies underestimate systemic vulnerability, distilling the evidence into a practical Map–Monitor–Test–Intervene workflow that serves researchers designing multilayer propagation studies, practitioners assessing portfolio and counterparty risks, and supervisors calibrating stress tests. We synthesise 112 studies (2015-2025) across six domains: Bank–firm Networks, Corporate Networks, Global Trade and Supply-Chain Networks, Interbank Networks, Financial Markets, and Global Systemic Risks. Reported magnitudes include up to 90% understatement of systemic risk when a single exposure layer is analysed in isolation, up to 50% of systemic risk missed when overlapping portfolios are omitted, and critical leverage thresholds overstated by 45% to 300% when cross-channel interactions are ignored. Three findings recur: layers encode distinct mechanisms, so one layer is often a poor proxy for another, with overlay aggregation hiding feedback; cross-layer coupling amplifies losses and tightens stability margins; and systemic importance depends on the state of the financial system, concentrating in a small minority of institutions that bridge multiple channels. Collapsing channels is no longer a harmless simplification when stability judgements, risk management, and policy decisions depend on how financial stress propagates.