Five years after the great recession the European interbank market still remains fragmented. The issue of financial contagion and therewith connected systemic risks have come to the attention of policy makers not just since the Cyprian financial crisis in March 2013. In this master thesis, I analyse the link between the degree of financial integration of interbank markets and financial stability. There are several ways to model financial contagion in the interbank market. The channel taken up in this piece of work, identifies balance sheet interbank connections as a root cause of financial contagion (e.g. Allen & Gale, 2000). In my thesis I extend the model by Allen & Gale (2000) in two ways. Firstly, by introducing the concept of a hub and spoke structure, the model is customized to the European interbank market (e.g. Galati & Tsatsaronis, 2003). Herein, large banks serve as transmitter for small banks? international exposure via "cross-border banking" transactions. Analysing financial contagion within the mentioned hub and spoke structure reveals, that an excessive shock can lead to the collapse of the whole interbank system. With this insight in mind the logical second adaption of Alan and Gale?s model is to search for measures that increase the resilience of the European inter-banking system. Within the model, it can be shown, that a higher degree of financial integration reduces the risk of financial contagion, hence lowers the probability of systemic crises. On these grounds one can argue, that the introduction of a stabilization fund, which will be a fundamental part of the upcoming European banking union, significantly supports interbank market integration.