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Does Interbank Borrowing Reduce Bank Risk?

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Author Info
Valeriya Dinger (University of Bonn valeriya.dinger@uni-bonn.de)
Jürgen von Hagen (Zentrum für Europäische Integrationsforschung Rheinische Friedrich-Wilhelms-Universität Bonn Walter Flex Strasse 3 53113 Bonn Tel. (0228) 73-9199 Fax (0228) 73-1809 Email vonhagen@uni-bonn.de)

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Abstract

In this paper we investigate whether banks that borrow from other banks have lower risk levels. We concentrate on a large sample of Central and Eastern European banks which allows us to explore the impact of interbank lending when exposures are long-term and interbank borrowers are small banks. The results of the empirical analysis generally confirm the hypothesis that long-term interbank exposures result in lower risk of the borrowing banks.

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Publisher Info
Paper provided by SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich in its series Discussion Papers with number 223.

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Date of creation: Nov 2007
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Handle: RePEc:trf:wpaper:223

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Related research
Keywords: interbank market; bank risk; market discipline; transition countries;

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Find related papers by JEL classification:
G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Mortgages
E53 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Deposit Insurance

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Douglas D. Evanoff & Larry D. Wall, 2001. "Sub-debt yield spreads as bank risk measures," Working Paper Series WP-01-03, Federal Reserve Bank of Chicago. [Downloadable!]
    Other versions:
  2. Furfine, Craig H, 2001. "Banks as Monitors of Other Banks: Evidence from the Overnight Federal Funds Market," Journal of Business, University of Chicago Press, vol. 74(1), pages 33-57, January. [Downloadable!] (restricted)
  3. Billett, Matthew T. & Garfinkel, Jon A. & O'Neal, Edward S., 1998. "The cost of market versus regulatory discipline in banking1," Journal of Financial Economics, Elsevier, vol. 48(3), pages 333-358, June. [Downloadable!] (restricted)
  4. Allen N. Berger, 1991. "Market discipline in banking," Proceedings, Federal Reserve Bank of Chicago, pages 419-437.
  5. Nikolay Nenovsky & Kalina Dimitrova, 2003. "Deposit Insurance During EU Accession," William Davidson Institute Working Papers Series 2003-617, William Davidson Institute at the University of Michigan Stephen M. Ross Business School. [Downloadable!]
  6. Franklin Allen & Douglas Gale, 1998. "Financial Contagion Journal of Political Economy," Center for Financial Institutions Working Papers 98-31, Wharton School Center for Financial Institutions, University of Pennsylvania. [Downloadable!]
  7. Billett, Matthew T & Garfinkel, Jon A, 2004. "Financial Flexibility and the Cost of External Finance for U.S. Bank Holding Companies," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 36(5), pages 827-52, October.
  8. Donald Morgan & Kevin Stiroh, 2001. "Market Discipline of Banks: The Asset Test," Journal of Financial Services Research, Springer, vol. 20(2), pages 195-208, October. [Downloadable!] (restricted)
  9. Jean-Charles Rochet & Jean Tirole, 1996. "Interbank lending and systemic risk," Proceedings, Board of Governors of the Federal Reserve System (U.S.), pages 733-765.
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  10. Freixas, Xavier & Parigi, Bruno M & Rochet, Jean-Charles, 2000. "Systemic Risk, Interbank Relations, and Liquidity Provision by the Central Bank," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 32(3), pages 611-38, August.
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  11. Adam B. Ashcraft, 2006. "Does the market discipline banks? New evidence from the regulatory capital mix," Staff Reports 244, Federal Reserve Bank of New York. [Downloadable!]
  12. Brenda González-Hermosillo, 1996. "Banking Sector Fragility and Systemic Sources of Fragility," IMF Working Papers 96/12, International Monetary Fund.
  13. George Clarke & Robert Cull & Maria Soledad Martinez Peria & Susana M. S·nchez, 2003. "Foreign Bank Entry: Experience, Implications for Developing Economies, and Agenda for Further Research," World Bank Research Observer, Oxford University Press, vol. 18(1), pages 25-59.
  14. Berger, Allen N. & Miller, Nathan H. & Petersen, Mitchell A. & Rajan, Raghuram G. & Stein, Jeremy C., 2005. "Does function follow organizational form? Evidence from the lending practices of large and small banks," Journal of Financial Economics, Elsevier, vol. 76(2), pages 237-269, May. [Downloadable!] (restricted)
    Other versions:
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