This paper considers the issue of "Too Connected to Fail" (TCTF) for a system of banks endogenously interconnected with both credit and insurance claims. The interbank credit network results from the circulation of banks' liabilities as a means of payment. By tracking their circulation, this...

Bank credit, as a means of payment, circulates in a circuit: It is first originated from the banking system, then used for trading, and eventually deposited back to the banking system. This circulation creates an interbank network that has been little studied. I characterize how this interbank...