A rollover-based source of the European fragmentation

Jessica Reale

Chapter 9 in Central Banking, Monetary Policy, and the European Central Bank, 2025, pp 164-183 from Edward Elgar Publishing

Abstract: The 2007–2008 financial crisis highlighted the importance of addressing interbank market frictions. The fragmentation seen during the European Sovereign Debt Crisis weakened monetary policy effectiveness and threatened the stability of the currency union. Without a clear understanding of interbank frictions, abandoning unconventional measures could be detrimental. The global dysfunction of interbank markets has led to new interpretations beyond asymmetric information, market liquidity, and credit risk. However, the distress in European interbank markets has not yet fully explored banks’ exposure to rollover risk. This chapter reexamines banks’ roles in interbank dynamics, focusing on how rollover risk might amplify European banks’ vulnerabilities. It explores the connections between rollover risk and interbank frictions, outlining key research gaps. Notably, formal analyses of funding liquidity asymmetries and the drivers behind banks’ choices in secured versus unsecured markets are still lacking. Addressing these gaps is crucial for tackling interbank market fragmentation and safeguarding Eurozone financial stability.

Keywords: European fragmentation; Interbank markets; Monetary policies; Macro-prudential regulations (search for similar items in EconPapers)
Date: 2025
ISBN: 9781035324262
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.elgaronline.com/doi/10.4337/9781035324279.00021 (application/pdf)
Our link check indicates that this URL is bad, the error code is: 403 Forbidden

Related works:
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:elg:eechap:22920_9

Ordering information: This item can be ordered from
http://www.e-elgar.com

Access Statistics for this chapter

More chapters in Chapters from Edward Elgar Publishing
Bibliographic data for series maintained by Jack Sweeney ().