Trading Partners in the Interbank Lending Market

Gara Afonso, Anna Kovner and Antoinette Schoar

No 620, Staff Reports from Federal Reserve Bank of New York

Abstract: There is substantial heterogeneity in the structure of trading relationships in the U.S. overnight interbank lending market: Some banks rely on spot transactions, while a majority form stable, concentrated borrowing relationships to hedge liquidity needs. Borrowers pay lower prices and borrow more from their concentrated lenders. When there are exogenous shocks to liquidity supply (days with low GSE lending), concentrated lenders insulate borrowers from the shocks without charging significantly higher interest rates.

Keywords: interbank lending; OTC markets (search for similar items in EconPapers)
JEL-codes: D40 E59 G10 G21 (search for similar items in EconPapers)
Pages: 54 pages
Date: 2013
New Economics Papers: this item is included in nep-ban and nep-mon
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Citations: View citations in EconPapers (59)

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