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Identification of interbank loans and interest rates from interbank payments – A reliability assessment

Author

Listed:
  • Q. Farooq Akram

    (Norges Bank)

  • Mats B. Fevolden

    (Norges Bank)

  • Lyndsie H. Smith

    (Norges Bank)

Abstract

We investigate the reliability of the `Furfine filter' often used to identify interbank loans and interest rates from interbank payments settled at central banks. To this end, we have been granted access to records of all unsecured overnight interbank loans during a month from the banks that participated in Norges Bank’s real-time gross settlement system. The filter applied was able to identify each of these loans and correctly derive the associated interest rates. The filter's reliability is also supported by additional evidence based on the Norwegian Overnight Weighted Average (NOWA) interest rates beyond the survey month. Sensitivity analyses suggest the share of false or overlooked loans may remain small if the filter design largely incorporates interbank market conventions regarding loan size requests and interests rate quotes.

Suggested Citation

  • Q. Farooq Akram & Mats B. Fevolden & Lyndsie H. Smith, 2018. "Identification of interbank loans and interest rates from interbank payments – A reliability assessment," Working Paper 2018/8, Norges Bank.
    • Handle: RePEc:bno:worpap:2018_08
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    File URL: https://www.norges-bank.no/en/Published/Papers/Working-Papers/2018/82018/
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    More about this item

    Keywords

    Overnight interbank market; Furfine-algorithm; RTGS;
    All these keywords.

    JEL classification:

    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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