  We derive the default cascade model and the fire-sale spillover model in a
unified interdependent framework. The interactions among banks include not only
direct cross-holding, but also indirect dependency by holding mutual assets
outside the banking system. Using data extracted from the European Banking
Authority, we present the interdependency network composed of 48 banks and 21
asset classes. For the robustness, we employ three methods, called
$\textit{Anan}$, $\textit{Ha\l{}a}$ and $\textit{Maxe}$, to reconstruct the
asset/liability cross-holding network. Then we combine the external portfolio
holdings of each bank to compute the interdependency matrix. The
interdependency network is much denser than the direct cross-holding network,
showing the complex latent interaction among banks. Finally, we perform
macroprudential stress tests for the European banking system, using the adverse
scenario in EBA stress test as the initial shock. For different reconstructed
networks, we illustrate the hierarchical cascades and show that the failure
hierarchies are roughly the same except for a few banks, reflecting the
overlapping portfolio holding accounts for the majority of defaults. We also
calculate systemic vulnerability and individual vulnerability, which provide
important information for supervision and relevant management actions.
