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Identifying relationship lending in the interbank market: A network approach

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  • Kobayashi, Teruyoshi
  • Takaguchi, Taro

Abstract

Relationship lending is broadly interpreted as a strong partnership between a lender and a borrower. Nevertheless, we still lack consensus regarding how to quantify the strength of a lending relationship, while simple statistics such as the frequency and volume of loans have been used as proxies in previous studies. Here, we propose statistical tests to identify relationship lending as a significant tie between banks. Application of the proposed method to the Italian interbank networks reveals that the fraction of relationship lending among all bilateral trades has been quite stable and that the relationship lenders tend to impose high interest rates at the time of financial distress.

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  • Kobayashi, Teruyoshi & Takaguchi, Taro, 2018. "Identifying relationship lending in the interbank market: A network approach," Journal of Banking & Finance, Elsevier, vol. 97(C), pages 20-36.
    • Handle: RePEc:eee:jbfina:v:97:y:2018:i:c:p:20-36
    DOI: 10.1016/j.jbankfin.2018.09.018
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    Cited by:

    1. Carlos León & Javier Miguélez, 2020. "Interbank relationship lending in Colombia," Borradores de Economia 1118, Banco de la Republica de Colombia.
    2. Teruyoshi Kobayashi & Anna Sapienza & Emilio Ferrara, 2018. "Extracting the multi-timescale activity patterns of online financial markets," Discussion Papers 1809, Graduate School of Economics, Kobe University.
    3. Tabak, Benjamin Miranda & Silva, Thiago Christiano & Fiche, Marcelo Estrela & Braz, Tércio, 2021. "Citation likelihood analysis of the interbank financial networks literature: A machine learning and bibliometric approach," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 562(C).

    More about this item

    Keywords

    Relationship lending; Interbank markets; Temporal networks;

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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