EconPapers    
Economics at your fingertips  
 

Relationship lending in the interbank market and the price of liquidity

Falk Bräuning and Falko Fecht ()

No 22/2012, Discussion Papers from Deutsche Bundesbank

Abstract: This paper empirically investigates the effect of interbank relationship lending on banks' access to liquidity. Our analysis is based on German interbank payment data which we use to create a panel of unsecured overnight loans between 1079 distinct borrower-lender pairs. The data shows that banks rely on repeated interactions with the same counterparties to trade liquidity. For the price of liquidity, we find that in the run-up to the recent financial crisis of 2007/08 relationship lenders charged already higher interest rates to their borrowers after controlling for other bank specific characteristics and general market conditions. By contrast, during the crisis borrowers paid on average lower rates to their relationship lenders compared to spot lenders. The observed interest rate differences are statistically and economically significant and in line with theory that relationship lenders have private information about the creditworthiness of their close borrowers.

Keywords: Interbank Market; Relationship Lending; Liquidity Crisis; Central Counterpart; Financial Contagion (search for similar items in EconPapers)
JEL-codes: D61 E44 G10 G21 (search for similar items in EconPapers)
Date: 2012
New Economics Papers: this item is included in nep-ban
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (44) Track citations by RSS feed

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/64813/1/726797995.pdf (application/pdf)

Related works:
Journal Article: Relationship Lending in the Interbank Market and the Price of Liquidity (2017) Downloads
Working Paper: Relationship lending in the interbank market and the price of liquidity (2016) Downloads
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:zbw:bubdps:222012

Access Statistics for this paper

More papers in Discussion Papers from Deutsche Bundesbank Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().

 
Page updated 2022-01-07
Handle: RePEc:zbw:bubdps:222012