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Inferring interbank loans and interest rates from interbank payments - an evaluation

Author

Listed:
  • Q. Farooq Akram

    (Norges Bank (Central Bank of Norway))

  • Casper Christophersen

    (Norges Bank (Central Bank of Norway))

Abstract

We investigate whether overnight interbank loans and interest rates can be reliably inferred at the market and bank level from central banks' interbank payments data. We identify overnight loans and interest rates among interbank payments for 11 banks in Norway and compare them with the actual overnight loans and interest rates reported daily by these banks to the Norwegian central bank since October 2011. We find that interbank payments can provide reliable information about overnight lending and overnight interest rates at the market level, and even at the bank level, for relatively small overnight lenders and large overnight lenders that mostly lend on their own behalf.

Suggested Citation

  • Q. Farooq Akram & Casper Christophersen, 2013. "Inferring interbank loans and interest rates from interbank payments - an evaluation," Working Paper 2013/26, Norges Bank.
    • Handle: RePEc:bno:worpap:2013_26
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    File URL: https://www.norges-bank.no/en/news-events/news-publications/Papers/Working-Papers/2013/WP-201326/
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    References listed on IDEAS

    as
    1. 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, vol. 74(1), pages 33-57, January.
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    3. Q. Akram & Casper Christophersen, 2013. "Norwegian Overnight Interbank Interest Rates," Computational Economics, Springer;Society for Computational Economics, vol. 41(1), pages 11-29, January.
    4. Bech, Morten L. & Atalay, Enghin, 2010. "The topology of the federal funds market," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 389(22), pages 5223-5246.
    5. Olivier Armantier & Adam Copeland, 2012. "Assessing the quality of “Furfine-based” algorithms," Staff Reports 575, Federal Reserve Bank of New York.
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    Cited by:

    1. Anthony Brassil & Helen Hughson & Mark McManus, 2016. "Identifying Interbank Loans from Payments Data," RBA Research Discussion Papers rdp2016-11, Reserve Bank of Australia.

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    More about this item

    Keywords

    Furfine; Overnight interbank rates; Interbank payments.;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects

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