Interbank tiering and money center banks

Ben Craig and Goetz von Peter ()

Journal of Financial Intermediation, 2014, vol. 23, issue 3, 322-347

Abstract: This paper provides evidence that interbank markets are tiered rather than flat, in the sense that most banks do not lend to each other directly but through money center banks acting as intermediaries. We capture the concept of tiering by developing a core-periphery model, and devise a procedure for fitting the model to real-world networks. Using Bundesbank data on bilateral interbank exposures among 2000 banks from 1999 to 2012, we find strong evidence of tiering in the German banking system. This extent of tiering is unlikely to arise in standard random networks. Indeed, we show that bank specialization and balance sheet variables predict how banks position themselves in the interbank market. This link provides a promising avenue for understanding the formation of financial networks.

Keywords: Interbank markets; Intermediation; Networks; Tiering; Core; Market structure (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (387)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1042957314000126
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Interbank tiering and money center banks (2010)
Working Paper: Interbank tiering and money center banks (2010)
Working Paper: Interbank tiering and money center banks (2010)
Working Paper: Interbank tiering and money center banks (2009)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinin:v:23:y:2014:i:3:p:322-347

DOI: 10.1016/j.jfi.2014.02.003

Access Statistics for this article

Journal of Financial Intermediation is currently edited by Elu von Thadden

More articles in Journal of Financial Intermediation from Elsevier
Bibliographic data for series maintained by Catherine Liu ().