Before revision:  In a model financial network, we show that the origin of instabilityresides in the presence of specific types of cyclical structures , regardless of many of the details of the distress propagation mechanism. In particular, we show the existence of trajectories in the space of graphs along which a complex network turns from stable to unstable, although at each point along the trajectory its nodes satisfy constraints that would apparently make them individually stable. In the financial context, our findings have important implications for policies aimed at increasing financial stability . We illustrate the propositions on a sample dataset for the top 50 EU listed banks between 2008 and 2013. More in general, our results shed light on previous findings on the instability of model ecosystems and are relevant for a broad class of dynamical processes on complex networks .
After revision:  In a model financial network, we show that the origin of instabilityresides in the presence of specific types of cyclical structures , regardless of many of the details of how institutions interact, showing that policy-relevant analysis of the factors affecting financial stability can be carried out while abstracting away from such details .