Bad Sovereign or Bad Balance Sheets? Euro Interbank Market Fragmentation and Monetary Policy, 2011-2015
Silvia Gabrieli () and
Claire Labonne
No RPA 18-3, Supervisory Research and Analysis Working Papers from Federal Reserve Bank of Boston
Abstract:
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 sovereign-dependence and balance sheet fragmentation alike.
Keywords: interbank markets; credit risks; fragmentation; sovereign risk; country risk; credit rationing; market discipline (search for similar items in EconPapers)
JEL-codes: E43 E58 G01 G15 G21 (search for similar items in EconPapers)
Pages: 49 pages
Date: 2018-07-12
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 (8)
Downloads: (external link)
https://www.bostonfed.org/publications/risk-and-po ... -balance-sheets.aspx Full text (text/html)
https://www.bostonfed.org/-/media/Documents/Workingpapers/PDF/2018/rpa1803.pdf Full text (application/pdf)
Related works:
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)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:fip:fedbqu:rpa18-3
Ordering information: This working paper can be ordered from
Access Statistics for this paper
More papers in Supervisory Research and Analysis Working Papers from Federal Reserve Bank of Boston Contact information at EDIRC.
Bibliographic data for series maintained by Catherine Spozio ().