Competition among Financial Intermediaries and the Risk of Contagious Failures
AbstractThe paper presents a model where financial intermediaries invest in a safe and a risky, two-period asset -with aggregate and idiosyncratic shocks on tire risky asset. The realization of returns is privately observed by banks, which offer deposit contracts, with a promised return at t = 1, the level of which depends on the degree of competition in the banking industry. Banks are sensitive .to the propagation of other banks' failures: depositors try to infer the state of the economy.and revise their beliefs after observing too many failures, hence they may watt to rut even on relatively healthy banks.
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Bibliographic InfoPaper provided by Banque de France in its series Working papers with number 30.
Length: 44 pages
Date of creation: 1995
Date of revision:
Term structure of interest rates ; Expectations hypothesis ; Error-correction model.;
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- Grégory Nguyen, 2003. "The Belgian Interbank Market: Interbank Linkages and Systemic Risk," Financial Stability Review, National Bank of Belgium, vol. 1(1), pages 105-123, June.
- Degryse, Hans & Nguyen, G, 2004.
"Interbank exposures: An empirical examination of systemic risk in the belgian banking system,"
Open Access publications from Katholieke Universiteit Leuven
urn:hdl:123456789/121546, Katholieke Universiteit Leuven.
- Degryse, H.A. & Nguyen, G., 2004. "Interbank Exposures: An Empirical Examination of Systemic Risk in the Belgian Banking System," Discussion Paper 2004-4, Tilburg University, Center for Economic Research.
- Hans Degryse & Grégory Nguyen, 2004. "Interbank exposures: an empirical examination of systemic risk in the Belgian banking system," Working Paper Research 43, National Bank of Belgium.
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