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What Is a Prime Bank? A Euribor–OIS Spread Perspective

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  • Marco Taboga

Abstract

Since the outbreak of the financial crisis in 2007, the level and volatility of the Euribor–OIS spreads have increased significantly. According to the literature, this variability is mainly explained by credit and liquidity risk premia. I provide evidence that part of the variability might also be explained by ambiguity in the phrasing of the Euribor survey. The participants in the survey are asked at what rate they believe interbank funds are exchanged between prime banks; given the lack of a clear definition of a prime bank, this question might leave room for subjective judgment. In particular, I find evidence that some of the variability of the Euribor rates might be explained by changes in the survey participants' perception of what a prime bank is. This evidence adds to the difficulties already encountered by previous studies in identifying and measuring exactly the determinants of the Euribor rates. I argue that these difficulties are at odds with the clarity, simplicity and replicability that should be required of a widely used financial benchmark.

Suggested Citation

  • Marco Taboga, 2014. "What Is a Prime Bank? A Euribor–OIS Spread Perspective," International Finance, Wiley Blackwell, vol. 17(1), pages 51-75, March.
    • Handle: RePEc:bla:intfin:v:17:y:2014:i:1:p:51-75
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    Cited by:

    1. Geršl, Adam & Lešanovská, Jitka, 2014. "Explaining the Czech interbank market risk premium," Economic Systems, Elsevier, vol. 38(4), pages 536-551.
    2. Pinter, Julien & Boissel, Charles, 2016. "The Eurozone deposit rates’ puzzle: Choosing the right benchmark," Economics Letters, Elsevier, vol. 148(C), pages 33-36.
    3. Rainone, Edoardo, 2020. "The network nature of over-the-counter interest rates," Journal of Financial Markets, Elsevier, vol. 47(C).
    4. Marcello Pericoli & Marco Taboga, 2022. "Nearly Exact Bayesian Estimation of Non-linear No-Arbitrage Term-Structure Models [Pricing the Term Structure with Linear Regressions]," Journal of Financial Econometrics, Oxford University Press, vol. 20(5), pages 807-838.
    5. Ugo Albertazzi & Margherita Bottero, 2013. "The procyclicality of foreign bank lending: evidence from the global financial crisis," Temi di discussione (Economic working papers) 926, Bank of Italy, Economic Research and International Relations Area.
    6. Marcello Pericoli & Marco Taboga, 2015. "Understanding policy rates at the zero lower bound: insights from a Bayesian shadow rate model," Temi di discussione (Economic working papers) 1023, Bank of Italy, Economic Research and International Relations Area.
    7. Marcello Pericoli & Marco Taboga, 2015. "Decomposing euro area sovereign spreads: credit, liquidity and convenience," Temi di discussione (Economic working papers) 1021, Bank of Italy, Economic Research and International Relations Area.
    8. Accetturo, Antonio & Bugamelli, Matteo & Lamorgese, Andrea R., 2013. "Skill upgrading and exports," Economics Letters, Elsevier, vol. 121(3), pages 417-420.
    9. Li, Ming & Sun, Hang & Zong, Jichuan, 2021. "Intertemporal imitation behavior of interbank offered rate submissions," Journal of Banking & Finance, Elsevier, vol. 132(C).

    More about this item

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G2 - Financial Economics - - Financial Institutions and Services

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