A firm fails. Its suppliers lose a customer. Its bank loses a borrower. The supplier's bank, exposed through a different loan, absorbs the secondary shock. The cascade crosses from the production layer — where firms buy and sell — to the banking layer — where firms borrow and banks lend to each other. Analyzing either layer alone misses the coupling that makes the system fragile.
A multilayer bank-firm network model (arXiv:2603.09854) reconstructs both layers from publicly available balance sheet data: the production network (supplier-customer relationships among firms) and the banking network (corporate loans and interbank exposures). Shocks propagate within and across layers. A disruption to a manufacturer cascades through the production network to its customers, then jumps to the banking network through loan defaults, then spreads through interbank lending to banks with no direct exposure to the original failure.
The structural insight: resilience is a multilayer property. A firm that looks robust in the production network — diversified suppliers, strong revenue — might be critical in the banking network because its bank is a hub of interbank lending. Stress-testing the production network alone would rate it as low-risk. The systemic importance lives in the coupling, not in either layer.
The practical contribution is that the reconstruction works from balance sheet data that's publicly available. Network-based stress testing has historically required proprietary transaction data that regulators can't access at scale. Reconstructing the topology from what IS available — assets, liabilities, revenue, loans — trades precision for coverage. You can test the entire economy approximately rather than one bank precisely.