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Does Interbank Borrowing Reduce Bank Risk?

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  • Dinger, Valeriya
  • Hagen, Jürgen von

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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Bibliographic Info

Paper provided by Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich in its series Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 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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Keywords: interbank market; bank risk; market discipline; transition countries;

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References

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  1. 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, World Bank Group, World Bank Group, vol. 18(1), pages 25-59.
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  15. Furfine, Craig H, 2001. "Banks as Monitors of Other Banks: Evidence from the Overnight Federal Funds Market," The Journal of Business, University of Chicago Press, University of Chicago Press, vol. 74(1), pages 33-57, January.
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  18. Valeriya Dinger & Jürgen von Hagen, 2011. "The Competitive Advantage of Incumbents: Evidence from Newly Liberalized Banking Industries," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, Mohr Siebeck, Tübingen, vol. 167(4), pages 578-607, December.
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Citations

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Cited by:
  1. Itai Agur, 2011. "Bank Risk within and across Equilibria," DNB Working Papers, Netherlands Central Bank, Research Department 305, Netherlands Central Bank, Research Department.
  2. Affinito, Massimiliano, 2013. "Central bank refinancing, interbank markets and the hypothesis of liquidity hoarding: evidence from a euro-area banking system," Working Paper Series, European Central Bank 1607, European Central Bank.
  3. Affinito, Massimiliano, 2012. "Do interbank customer relationships exist? And how did they function in the crisis? Learning from Italy," Journal of Banking & Finance, Elsevier, Elsevier, vol. 36(12), pages 3163-3184.
  4. Carrera, Cesar & Vega, Hugo, 2012. "Interbank Market and Macroprudential Tools in a DSGE Model," Working Papers, Banco Central de Reserva del Perú 2012-014, Banco Central de Reserva del Perú.
  5. Craig, Ben & Koetter, Michael & Krüger, Ulrich, 2014. "Interbank lending and distress: Observables, unobservables, and network structure," Discussion Papers 18/2014, Deutsche Bundesbank, Research Centre.
  6. Jacopo Cimadomo & Sebastian Hauptmeier & Tom Zimmermann, 2012. "Fiscal Consolidations and Banking Stability," Working Papers 2012-32, CEPII research center.
  7. Distinguin, Isabelle & Kouassi, Tchudjane & Tarazi, Amine, 2013. "Interbank deposits and market discipline: Evidence from Central and Eastern Europe," Journal of Comparative Economics, Elsevier, vol. 41(2), pages 544-560.
  8. Craig, B.R. & Dinger, V., 2010. "Deposit Market Competition, Wholesale Funding, and Bank Risk," Discussion Paper, Tilburg University, Center for Economic Research 2010-65S, Tilburg University, Center for Economic Research.
  9. Massimiliano Affinito, 2013. "Central bank refinancing, interbank markets, and the hypothesis of liquidity hoarding: evidence from a euro-area banking system," Temi di discussione (Economic working papers), Bank of Italy, Economic Research and International Relations Area 928, Bank of Italy, Economic Research and International Relations Area.
  10. Mamiza Haq & Amine Tarazi & Necmi Avkiran & Ana Rosa Fonceca, 2013. "Market Discipline and Bank Charter Value: The Case of Two Safe Banking Industries," Working Papers hal-00955135, HAL.
  11. Inoguchi, Masahiro, 2013. "Interbank market, stock market, and bank performance in East Asia," Pacific-Basin Finance Journal, Elsevier, Elsevier, vol. 25(C), pages 136-156.
  12. Massimiliano Affinito, 2011. "Do interbank customer relationships exist? And how did they function in the crisis? Learning from Italy," Temi di discussione (Economic working papers), Bank of Italy, Economic Research and International Relations Area 826, Bank of Italy, Economic Research and International Relations Area.
  13. Dragoş Ilie, 2012. "Sustainability and Organizational Change by Sustainable Crediting Therapy," The AMFITEATRU ECONOMIC journal, Academy of Economic Studies - Bucharest, Romania, vol. 14(32), pages 393-403, June.
  14. Andrievskaya, Irina & Semenova , Maria, 2013. "Market discipline and the Russian interbank market," BOFIT Discussion Papers, Bank of Finland, Institute for Economies in Transition 29/2013, Bank of Finland, Institute for Economies in Transition.

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