A network view on interbank market freezes

Arbeitspapier

We study the liquidity allocation among European banks around the Lehman insolvency using a novel dataset of all interbank loans settled via the Eurosystem's payment system TARGET2. Following the Lehman insolvency, lenders in the overnight segment become sensitive to counterparty characteristics and banks start hoarding liquidity by shortening the maturity of their interbank lending. This aggregate change in liquidity reallocation is accompanied by a substantial structural change that can best be characterized as a shrinking of the interbank network. Such a change in the network structure is consequential: banks with higher centrality within the network have better access to liquidity and are able to charge larger intermediation spreads. Therefore, we show the existence of a sizeable interbank lending channel.

Object Details

• ISBN: 978-3-95729-109-7
• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Bundesbank Discussion Paper ; No. 44/2014

Classification and Topics

• Classification: Wirtschaft ; Network Formation and Analysis: Theory ; Banks; Depository Institutions; Micro Finance Institutions; Mortgages
• Subject: interbank loans ; network topology ; financial stability

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Gabrieli, Silvia ; Georg, Co-Pierre
• Event: Veröffentlichung
• (who): Deutsche Bundesbank
• (where): Frankfurt a. M.
• (when): 2014

Further information

• Handle: http://hdl.handle.net/10419/106794
• Last update: 10.03.2025, 11:46 AM CET