Relationship Lending during a Trust Crisis on the Interbank Market: A Friend in Need is a Friend Indeed

Hans Degryse, Alexei Karas and Koen Schoors

No 19-04, Working Papers from Utrecht School of Economics

Abstract: We exploit uncertainty regarding banks' involvement in money laundering activities as a natural experiment to study the functioning of the interbank market in uncertain times. We show that bank couples with a stronger relationship (i.e., more frequent and reciprocal interactions before the event) are more likely to continue lending to one another, and at lower interest rates. This is in line with a “helping hand†or “flight to friends†hypothesis during crisis.

Keywords: banks; interbank market; relationship banking; helping-hand hypothesis (search for similar items in EconPapers)
Date: 2019-01
New Economics Papers: this item is included in nep-ban, nep-mon and nep-soc
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Citations: View citations in EconPapers (8)

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Related works:
Journal Article: Relationship lending during a trust crisis on the interbank market: A friend in need is a friend indeed (2019)
Working Paper: RELATIONSHIP LENDING DURING A TRUST CRISIS ON THE INTERBANK MARKET: A FRIEND IN NEED IS A FRIEND INDEED (2019)
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