We empirically investigate why wholesale funding is fragile by providing the first study of how individual banks borrow and lend in the euro unsecured and secured interbank market. Consistent with theories in which lenders enforce market discipline by monitoring counterparty credit risk and...

Banks lend more to banks that are similar to them. Using data from the German credit register and proprietary supervisory data on the quality of banks’ loan portfolio, we show that a similar portfolio of the lending and borrowing bank helps to overcome information asymmetries in interbank...

We study the functioning and possible breakdown of the interbank market in the presence of counterparty risk. We allow banks to have private information about the risk of their assets. We show how banks’ asset risk affects funding liquidity in the interbank market. Several interbank market...

This paper identifies simple conditions for monotone comparative statics of a unique equilibrium in the Akerlof-Wilson model. Separate conditions apply to trade volume and price. Trade volume increases when supply becomes both stronger and more elastic. In contrast, price decreases when supply...