The Interbank Market after August 2007: What Has Changed, and Why?

48 Pages Posted: 11 May 2010

See all articles by Paolo Angelini

Paolo Angelini

Bank of Italy

Andrea Nobili

Bank of Italy

Cristina Picillo

Bank for International Settlements (BIS)

Date Written: October 16, 2009

Abstract

The outbreak of the financial crisis coincided with a sharp increase of worldwide interbank interest rates. We analyze the micro and macroeconomic determinants of this phenomenon, finding that before August 2007 interbank rates were insensitive to borrower characteristics, whereas afterwards they became reactive to borrowers’ creditworthiness. At the same time, conditions for large borrowers became relatively more favorable, both before and after the failure of Lehman Brothers. This suggests that banks have become more discerning in their lending, a welcome change, but that moral hazard considerations related to the ”too big to fail” argument should remain a main concern for central banks.

Keywords: Interbank markets, Spreads, Financial crisis

JEL Classification: E43, E52

Suggested Citation

Angelini, Paolo and Nobili, Andrea and Picillo, Cristina, The Interbank Market after August 2007: What Has Changed, and Why? (October 16, 2009). Bank of Italy Temi di Discussione (Working Paper) No. 731, Available at SSRN: https://ssrn.com/abstract=1601845 or http://dx.doi.org/10.2139/ssrn.1601845

Paolo Angelini (Contact Author)

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Andrea Nobili

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Cristina Picillo

Bank for International Settlements (BIS) ( email )

Centralbahnplatz 2
Basel, Basel-Stadt 4002
Switzerland

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
474
Abstract Views
1,837
rank
75,448
PlumX Metrics