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Market discipline and the Russian interbank market

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  • Andrievskaya, Irina

    ()
    (BOFIT)

  • Semenova , Maria

    ()
    (BOFIT)

Abstract

The interbank market plays an important role in the overall function of the financial system. The efficiency of the interbank market, in turn, depends largely on its inherent disciplining mechanisms. This paper investigates the discipline mechanisms of Russia’s interbank market, testing the hypothesis that market discipline in Russia was strong enough to constrain excessive risk-taking by participating banks before, during, and after the 2008–2009 financial crisis. The existence of quantity-based market discipline is investigated using Heckman’s sample selection model and the efficiency of market discipline is studied with a panel data model. Our approach detects market discipline only during the financial crisis, not before or after. Even during the crisis, its efficiency in curbing bank risk-taking was rather low.

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File URL: http://www.suomenpankki.fi/bofit/tutkimus/tutkimusjulkaisut/dp/Documents/2013/dp2913.pdf
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Bibliographic Info

Paper provided by Bank of Finland, Institute for Economies in Transition in its series BOFIT Discussion Papers with number 29/2013.

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Length: 39 pages
Date of creation: 29 Nov 2013
Date of revision:
Handle: RePEc:hhs:bofitp:2013_029

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Postal: Bank of Finland, BOFIT, P.O. Box 160, FI-00101 Helsinki, Finland
Phone: + 358 10 831 2268
Fax: + 358 10 831 2294
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Web page: http://www.suomenpankki.fi/bofit_en/
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Keywords: market discipline; interbank market; risk-taking; banks; Russia;

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