Unsecured and Secured Funding

Mario Di Filippo, Angelo Ranaldo and Jan Wrampelmeyer

Journal of Money, Credit and Banking, 2022, vol. 54, issue 2-3, 651-662

Abstract: We study how individual banks borrow and lend in the euro unsecured and secured interbank market. We find that banks with lower credit worthiness replace unsecured with secured borrowing, which is consistent with a reduction in the supply of unsecured loans rather than a lower demand for funding. Riskier lenders replace unsecured with secured lending, suggesting that banks take precautionary measures and prefer to lend against safe collateral. Our results highlight the importance of a joint analysis of unsecured and secured funding. Separate analyses only give a partial view and might yield misleading conclusions when banks access both funding sources.

Date: 2022
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https://doi.org/10.1111/jmcb.12855

Related works:
Working Paper: Unsecured and Secured Funding (2018)
Working Paper: Unsecured and Secured Funding (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:wly:jmoncb:v:54:y:2022:i:2-3:p:651-662

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