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Trading partners in the interbank lending market

Author

Listed:
  • Afonso, Gara M.

    (Federal Reserve Bank of New York)

  • Kovner, Anna

    (Federal Reserve Bank of New York)

  • Schoar, Antoinette

    (Massachusetts Institute of Technology, Sloan School of Management)

Abstract

There is substantial heterogeneity in the structure of trading relationships in the U.S. overnight interbank lending market: Some banks rely on spot transactions, while a majority form stable, concentrated borrowing relationships to hedge liquidity needs. Borrowers pay lower prices and borrow more from their concentrated lenders. When there are exogenous shocks to liquidity supply (days with low GSE lending), concentrated lenders insulate borrowers from the shocks without charging significantly higher interest rates.

Suggested Citation

  • Afonso, Gara M. & Kovner, Anna & Schoar, Antoinette, 2013. "Trading partners in the interbank lending market," Staff Reports 620, Federal Reserve Bank of New York, revised 01 Oct 2014.
    • Handle: RePEc:fip:fednsr:620
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Francisco Blasques & Falk Bräuning & Iman van Lelyveld, 2015. "A dynamic network model of the unsecured interbank lending market," BIS Working Papers 491, Bank for International Settlements.
    2. Briana Chang & Shengxing Zhang, 2015. "Endogenous Market Making and Network Formation," Discussion Papers 1534, Centre for Macroeconomics (CFM).
    3. Aleksander Berentsen & Alessandro Marchesiani & Christopher Waller, 2014. "Floor Systems for Implementing Monetary Policy: Some Unpleasant Fiscal Arithmetic," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 17(3), pages 523-542, July.
    4. Chang, Briana & Zhang, Shengxing, 2015. "Endogenous market making and network formation," LSE Research Online Documents on Economics 65105, London School of Economics and Political Science, LSE Library.
    5. Vollmer, Uwe & Wiese, Harald, 2016. "Central bank standing facilities, counterparty risk, and OTC-interbank lending," The North American Journal of Economics and Finance, Elsevier, vol. 36(C), pages 101-122.
    6. repec:eee:dyncon:v:90:y:2018:i:c:p:310-342 is not listed on IDEAS
    7. S. Gabrieli & C.-P. Georg, 2014. "A network view on interbank market freezes," Working papers 531, Banque de France.
    8. repec:oup:revfin:v:21:y:2017:i:1:p:33-75. is not listed on IDEAS
    9. Falk Bräuning & Falko Fecht, 2017. "Relationship Lending in the Interbank Market and the Price of Liquidity," Review of Finance, European Finance Association, vol. 21(1), pages 33-75.
    10. Marco Di Maggio & Amir Kermani & Zhaogang Song, 2016. "The Value of Trading Relationships in Turbulent Times," NBER Working Papers 22332, National Bureau of Economic Research, Inc.
    11. repec:eee:jetheo:v:174:y:2018:i:c:p:16-56 is not listed on IDEAS
    12. Martinez, Constanza & Cizek, Pavel & Leon Rincon, Carlos, 2018. "Ownership Networks Effects on Secured Borrowing," Discussion Paper 2018-015, Tilburg University, Center for Economic Research.
    13. Song Han & Kleopatra Nikolaou, 2016. "Trading Relationships in the OTC Market for Secured Claims : Evidence from Triparty Repos," Finance and Economics Discussion Series 2016-064, Board of Governors of the Federal Reserve System (U.S.).
    14. Babus, Ana & Hu, Tai-Wei, 2017. "Endogenous intermediation in over-the-counter markets," Journal of Financial Economics, Elsevier, vol. 125(1), pages 200-215.
    15. Agur, Itai, 2014. "Bank risk within and across equilibria," Journal of Banking & Finance, Elsevier, vol. 48(C), pages 322-333.
    16. Rünstler, Gerhard, 2016. "Network Dependence in the Euro Area Money Market," Working Paper Series 1887, European Central Bank.
    17. Bluhm, Marcel & Georg, Co-Pierre & Krahnen, Jan-Pieter, 2016. "Interbank intermediation," Discussion Papers 16/2016, Deutsche Bundesbank.

    More about this item

    Keywords

    interbank lending; OTC markets;

    JEL classification:

    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • E59 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Other
    • 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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