  The European sovereign debt crisis has impaired many European banks. The
distress on the European banks may transmit worldwide, and result in a
large-scale knock-on default of financial institutions. This study presents a
computer simulation model to analyze the risk of insolvency of banks and
defaults in a bank credit network. Simulation experiments reproduce the
knock-on default, and quantify the impact which is imposed on the number of
bank defaults by heterogeneity of the bank credit network, the equity capital
ratio of banks, and the capital surcharge on big banks.
