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

Economics Letters, 2019, vol. 182, issue C, 1-4

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; Trust crisis; Relationship banking; Helping-hand hypothesis (search for similar items in EconPapers)
JEL-codes: G21 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (8)

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Related works:
Working Paper: 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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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:182:y:2019:i:c:p:1-4

DOI: 10.1016/j.econlet.2019.03.019

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