  Financial markets are exposed to systemic risk (SR), the risk that a major
fraction of the system ceases to function, and collapses. It has recently
become possible to quantify SR in terms of underlying financial networks where
nodes represent financial institutions, and links capture the size and maturity
of assets (loans), liabilities, and other obligations, such as derivatives. We
demonstrate that it is possible to quantify the share of SR that individual
liabilities within a financial network contribute to the overall SR. We use
empirical data of nationwide interbank liabilities to show that the marginal
contribution to overall SR of liabilities for a given size varies by a factor
of a thousand. We propose a tax on individual transactions that is proportional
to their marginal contribution to overall SR. If a transaction does not
increase SR it is tax-free. With an agent-based model (CRISIS macro-financial
model) we demonstrate that the proposed "Systemic Risk Tax" (SRT) leads to a
self-organised restructuring of financial networks that are practically free of
SR. The SRT can be seen as an insurance for the public against costs arising
from cascading failure. ABM predictions are shown to be in remarkable agreement
with the empirical data and can be used to understand the relation of credit
risk and SR.
