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COVID-19 and the fragmentation of the European interbank market

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  • Pala, Melissa

Abstract

This paper provides evidence of a highly fragmented European interbank market that is tightened during the COVID-19 pandemic, when the interbank market was under stress. Using a unique dataset of unsecured, overnight interbank loans at the transactional level allows me to apply advanced panel methods. Furthermore, this paper shows liquidity hoarding during the pandemic and relationship lending as a German phenomenon. In addition, there is evidence that borrowers who have to pay higher rates in the market are more likely to participate in tender auctions and that the COVID-19 pandemic had the greatest impact on smaller interbank borrowers.

Suggested Citation

  • Pala, Melissa, 2024. "COVID-19 and the fragmentation of the European interbank market," Discussion Papers 07/2024, Deutsche Bundesbank.
    • Handle: RePEc:zbw:bubdps:284408
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    References listed on IDEAS

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    More about this item

    Keywords

    nterbank Market; Relationship Lending; Liquidity; COVID-19; Monetary Policy;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation

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