  Measurement and management of credit concentration risk is critical for banks
and relevant for micro-prudential requirements. While several methods exist for
measuring credit concentration risk within institutions, the systemic effect of
different institutions' exposures to the same counterparties has been less
explored so far. In this paper, we propose a measure of the systemic credit
concentration risk that arises because of common exposures between different
institutions within a financial system. This approach is based on a network
model that describes the effect of overlapping portfolios. This network metric
is applied to synthetic and real world data to illustrate that the effect of
common exposures is not fully reflected in single portfolio concentration
measures. It also allows to quantify several aspects of the interplay between
interconnectedness and credit risk. Using this network measure, we formulate an
analytical approximation for the additional capital requirement corresponding
to the systemic risk arising from credit concentration interconnectedness. Our
methodology also avoids double counting between the granularity adjustment and
the common exposure adjustment. Although approximated, this common exposure
adjustment is able to capture, with only two parameters, an aspect of systemic
risk that can extend single portfolios view to a system-wide one.
