Structure in the Italian Overnight Loan Market
AbstractWe analyze the Italian interbank loan market from 1999 until 2010. The analysis of net trade flows shows a high imbalance caused by few large net borrowers in the market. The trading volume shows a significant drop starting in 2007, which accelerates with the Lehman default in late 2008. The network, based on trading relationships, is very dense. Hence, we try to identify strong links by looking for preferential lending relationships expressed by discounts in the loan rate. Furthermore, we estimate the dynamics of credit spreads for each bank and find that economically significant spreads for the overnight market only developed in 2010. The analysis of bilateral loan relationships reveals that in the pre-crisis era large net borrowers used to borrow at a slight discount. In the post-Lehman era borrowers with large net exposures paid more than the average market rate, which shows that the risk evaluation of market participants has changed considerably
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Bibliographic InfoPaper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 1772.
Length: 31 pages
Date of creation: May 2012
Date of revision:
interbank markets; overnight loans; preferential lending;
Other versions of this item:
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-05-29 (All new papers)
- NEP-BAN-2012-05-29 (Banking)
- NEP-FMK-2012-05-29 (Financial Markets)
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