Efficiency and bargaining power in the interbank loan market

Arbeitspapier

Using detailed loan transactions-level data we examine the efficiency of an overnight interbank lending market, and the bargaining power of its participants. Our analysis relies on the equilibrium concept of the core, which imposes a set of no-arbitrage conditions on trades in the market. For Canada we show that while the market is fairly efficient, some degree of inefficiency persists throughout our sample. The level of inefficiency matches distinct phases of both the Bank of Canada's operations as well as phases of the 2007- 2008 financial crisis, where more liquidity intervention implies more inefficiency. We find that bargaining power tilted sharply towards borrowers as the financial crisis progressed, and towards riskier borrowers. This supports a nuanced version of the Too- Big-To-Fail story, whereby participants continued to lend to riskier banks at favorable rates, not because of explicit support to the riskier banks provided by governmental authorities, but rather due to the collective self-interest of these banks.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: Bank of Canada Working Paper ; No. 2012-29

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Cooperative Games ; Banks; Depository Institutions; Micro Finance Institutions; Mortgages ; Financial Institutions and Services: Government Policy and Regulation ; Central Banks and Their Policies
• Thema: Financial institutions ; Payment, clearing, and settlement systems

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Allen, Jason ; Chapman, James ; Echenique, Federico ; Shum, Matthew
• Ereignis: Veröffentlichung
• (wer): Bank of Canada
• (wo): Ottawa
• (wann): 2012

Weitere Informationen

• DOI: doi:10.34989/swp-2012-29
• Handle: http://hdl.handle.net/10419/80761
• Letzte Aktualisierung: 10.03.2025, 11:44 MEZ