Bad Sovereign or Bad Balance Sheets? Euro Interbank Market Fragmentation and Monetary Policy, 2011-2015
Silvia Gabrieli () and
Working papers from Banque de France
We measure the relative role of sovereign-dependence risk and balance sheet (credit) risk in euro area interbank market fragmentation from 2011 to 2015. We combine bank-to-bank loan data with detailed supervisory information on banks’ cross-border and cross-sector exposures. We study the impact of the credit risk on banks’ balance sheets on their access to, and the price paid for, interbank liquidity, controlling for sovereign-dependence risk and lenders’ liquidity shocks. We find that (i) high non-performing loan ratios on the GIIPS portfolio hinder banks’ access to the interbank market throughout the sample period; (ii) large sovereign bond holdings are priced in interbank rates from mid-2011 until the announcement of the OMT; (iii) the OMT was successful in closing this channel of cross-border shock transmission; it reduced sovereigndependence and balance sheet fragmentation alike.
Keywords: Interbank market; credit risk; fragmentation; sovereign risk; country risk; credit rationing; market discipline (search for similar items in EconPapers)
JEL-codes: G01 E43 E58 G15 G21 (search for similar items in EconPapers)
Pages: 50 pages
New Economics Papers: this item is included in nep-acc, nep-ban, nep-cba, nep-eec, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2) Track citations by RSS feed
Downloads: (external link)
https://publications.banque-france.fr/sites/defaul ... /documents/wp687.pdf (application/pdf)
Working Paper: Bad Sovereign or Bad Balance Sheets? Euro Interbank Market Fragmentation and Monetary Policy, 2011-2015 (2018)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:bfr:banfra:687
Access Statistics for this paper
More papers in Working papers from Banque de France Banque de France 31 Rue Croix des Petits Champs LABOLOG - 49-1404 75049 PARIS. Contact information at EDIRC.
Bibliographic data for series maintained by Michael brassart ().