EconPapers    
Economics at your fingertips  
 

Multiple lending, credit lines, and financial contagion

Giuseppe Cappelletti () and Paolo Emilio Mistrulli ()
Additional contact information
Giuseppe Cappelletti: European Central Bank

No 1123, Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: Multiple lending has been widely investigated from both an empirical and a theoretical perspective. Nevertheless, the implications of multiple lending for the stability of the banking system still need to be understood. By lending to a common set of borrowers, banks are interconnected and then exposed to financial contagion phenomena, even if not directly. In this paper, we investigate a specific type of externality that originates from those borrowers that obtain liquidity from more than one bank. In this case, contagion may occur if a bank hit by a liquidity shock calls in some loans and borrowers then pay them back by drawing money from other banks. We show that, under certain circumstances that make other sources of liquidity unavailable or too costly, multiple lending might be responsible for a large liquidity shortage.

Keywords: financial contagion; multiple lending; credit lines (search for similar items in EconPapers)
JEL-codes: G21 G28 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban, nep-cfn and nep-pay
Date: 2017-06
References: View references in EconPapers View complete reference list from CitEc
Citations Track citations by RSS feed

Downloads: (external link)
http://www.bancaditalia.it/pubblicazioni/temi-disc ... 123/en_tema_1123.pdf (application/pdf)

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:bdi:wptemi:td_1123_17

Access Statistics for this paper

More papers in Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area Contact information at EDIRC.
Series data maintained by ().

 
Page updated 2017-09-29
Handle: RePEc:bdi:wptemi:td_1123_17