Interbank overnight interest rates - gains from systemic importance

Qaisar Akram and Casper Christophersen

No 2010/11, Working Paper from Norges Bank

Abstract: We study overnight interbank interest rates paid by banks in Norway over the period 2006-2009. We observe large variations in interest rates across banks and over time. During the financial crisis, the interest rates are found to be substantially below indicative quotes of interest rates provided by major banks. Our econometric model attributes the interest rate variation partly to differences in banks' characteristics including relative size and connectedness, implying favorable terms for banks of systemic importance. Moreover, interest rates are found to depend not only on overall liquidity in the interbank market, but possibly on its distribution among banks as well, suggesting exploitation of market power by banks with surplus liquidity. There is also evidence of stronger effects on interest rates of systemic importance, credit ratings and liquidity demand and supply since the start of the current financial crisis.

Keywords: Interbank money market; Interest rates; Systemic importance (search for similar items in EconPapers)
JEL-codes: E42 E43 E58 G21 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2010-06-30
New Economics Papers: this item is included in nep-ban, nep-cba and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (39)

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Persistent link: https://EconPapers.repec.org/RePEc:bno:worpap:2010_11

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