<p>This paper demonstrates the results of the simulated financial contagion spreading through the pan-European financial network, consisting of 43 European banking systems. The initial default of each banking system making up the network is assumed in order to simulate a credit-plus-funding shock for each scenario. In the next step, the contagion effects in the network, country-by-country capital impairment, and the strength of deleveraging in six Western Balkan countries are simulated. The simulation results suggest that a potential default of central nodes in the network, i.e., banking systems of the United Kingdom, Germany, or France, would probably cause strong contagion effects and further defaults throughout the network. Apart from those banking systems, the nodes, which are regional common lenders for the Western Balkan area (Austria and Italy), can cause strong deleveraging pressure in any of the Western Balkan countries in case of distress in those countries. The most interesting result suggests that the simulated default of other CESEE banking systems (for example, the banking systems of the Czech Republic, Slovakia, Romania, etc.) has the potential to cause strong deleveraging pressures on the Western Balkans. It seems that there are two different directions of risk transfer through the pan-European network. First, from the central nodes (global common lenders such as the United Kingdom, Germany, and France, and regional common lenders like Austria and Italy) to the peripheral nodes (the Western Balkans and the rest of CESEE). Second, a reverse transfer from the peripheral nodes to the central nodes and, in the next round, again from the central to the peripheral nodes, i.e., the Western Balkans. The simulation is conducted on year-end data from 2018, 2020, and 2022, indicating the rising contagion risk in 2020 and 2022 compared to 2018, probably because of changes in the financial network structure after the COVID-19 pandemic and the Russo-Ukrainian conflict.</p>