Our results uncover a so far undocumented ability of the interbank market to distinguish between banks of different quality in times of aggregate distress. We show empirical evidence that during the 2007 financial crisis the inability of some banks to roll over their interbank debt was not due...

Since the global financial crisis, economic literature has highlighted banks’ inclination to bolster up their liquid asset positions once the aggregate interbank funding market experiences a dry-up. To this regard, we show that liquidity hoarding and its detrimental effects on credit can also...

We introduce a novel simulation-based network approach, which provides full-fledged distributions of potential interbank losses. Based on those distributions we propose measures for (i) systemic importance of single banks, (ii) vulnerability of single banks, and (iii) vulnerability of the whole...

This paper shows that depending on the distribution of banks' uncertain liquidity needs and on how monetary policy is implemented, frictions in the interbank market may reinforce the effectiveness of monetary policy. These frictions imply that with its lending and deposit facilities the central...

This paper investigates the effects of interbank rate uncertainty on lending rates to euro area firms. We introduce a novel measure of interbank rate uncertainty, computed as the cross-sectional dispersion in interbank market rates on overnight unsecured loans. Using proprietary bank-level data,...

This paper investigates the effects of interbank rate uncertainty on lending rates to euro area firms. We introduce a novel measure of interbank rate uncertainty, computed as the cross-sectional dispersion in interbank market rates on overnight unsecured loans. Using proprietary bank-level data,...

To avoid illiquidity spillovers and basis risk in swaps, interbank lenders are especially cautious about whether interbank borrowers can meet their claims. This paper is about examining whether the incentive of interbank lenders to penalize risky borrowers can reduce the liquidity risk-taking of...

This paper analyses interbank risk using the information content of basis swap (BS) spreads, floating-to-floating interest rate swaps whose payments are associated with euro deposit rates for alternative tenors. We propose an empirical model to decompose BS quotes into persistent and transitory...

This paper identifies bank-specific-characteristics and market conditions that contribute to determine prices and demand for liquidity in the interbank market as wells as banks' access to this market. Results indicate that riskier banks pay higher prices and borrow less liquidity, concurrent...