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Does Interbank Borrowing Reduce Bank Risk?

  • Dinger, Valeriya
  • Hagen, Jürgen von

In this paper we investigate whether banks that borrow from other banks have lower risk levels. We concentrate on a large sample of Central and Eastern European banks which allows us to explore the impact of interbank lending when exposures are long-term and interbank borrowers are small banks. The results of the empirical analysis generally confirm the hypothesis that long-term interbank exposures result in lower risk of the borrowing banks.

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Paper provided by Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich in its series Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems with number 223.

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Date of creation: Nov 2007
Date of revision:
Handle: RePEc:trf:wpaper:223
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  1. Douglas D. Evanoff & Larry D. Wall, 2001. "Sub-debt yield spreads as bank risk measures," Working Paper Series WP-01-03, Federal Reserve Bank of Chicago.
  2. Billett, Matthew T. & Garfinkel, Jon A. & O'Neal, Edward S., 1998. "The cost of market versus regulatory discipline in banking," Journal of Financial Economics, Elsevier, vol. 48(3), pages 333-358, June.
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  8. K. Dimitrova & Nikolay Nenovsky, 2003. "Deposits insurance during EU accession," Post-Print halshs-00259793, HAL.
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  11. Franklin Allen & Douglas Gale, 1998. "Financial Contagion Journal of Political Economy," Center for Financial Institutions Working Papers 98-31, Wharton School Center for Financial Institutions, University of Pennsylvania.
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  14. Donald Morgan & Kevin Stiroh, 2001. "Market Discipline of Banks: The Asset Test," Journal of Financial Services Research, Springer, vol. 20(2), pages 195-208, October.
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  16. Brenda González-Hermosillo, 1996. "Banking Sector Fragility and Systemic Sources of Fragility," IMF Working Papers 96/12, International Monetary Fund.
  17. Valeriya Dinger & Jürgen von Hagen, 2011. "The Competitive Advantage of Incumbents: Evidence from Newly Liberalized Banking Industries," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 167(4), pages 578-607, December.
  18. Xavier Freixas & Jean-Charles Rochet, 1997. "Microeconomics of Banking," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061937, June.
  19. Rochet, Jean-Charles & Tirole, Jean, 1996. "Interbank Lending and Systemic Risk," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 28(4), pages 733-62, November.
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