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Identifying term interbank loans from Fedwire payments data

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Abstract

Interbank markets for term maturities experienced great stress during the 2007-09 financial crisis, as illustrated by the behavior of the one- and three-month Libor. Despite widespread interest in these markets, little data is available on dollar interbank lending for maturities beyond overnight. We develop a methodology to infer information about individual term dollar interbank loans settled through the Fedwire Funds Service, the large-value bank payment system operated by the Federal Reserve Banks. We find a sharp increase in the dispersion of inferred term interbank interest rates, a shortening of loan maturities, and a decline in term lending volume following the failure of Lehman Brothers in September 2008. Several diagnostic tests suggest that our approach provides a useful source of information about the term interbank market, allowing for a number of research applications.

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  • Dennis Kuo & David R. Skeie & James Vickery & Thomas Youle, 2013. "Identifying term interbank loans from Fedwire payments data," Staff Reports 603, Federal Reserve Bank of New York.
    • Handle: RePEc:fip:fednsr:603
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    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • 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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