Cross-Border Liquidity, Relationships and Monetary Policy: Evidence from the Euro Area Interbank Crisis

Abbassi, Puriya; Bräuning, Falk; Fecht, Falko; Peydró, José‐Luis

doi:10.2139/ssrn.2797022

Cited by 10 publications

(14 citation statements)

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“…Having this results in mind if one supposes that balance sheet exposures are the basis of the observed sovereign-bank spillovers, then the interbank market fragmentation that results from the stress of foreign member states could be attributed to a higher informational gap that exists between domestic and foreign lenders. From this perspective this paper joins the theoretical and empirical literature that explains the post-crisis cross-border interbank inactivity by even more pronounced informational asymmetries between foreign financial institutions (see Freixas & Holthausen 2005, Cassola et al 2008, Abbassi et al 2015.…”

Section: Related Literaturementioning

confidence: 68%

“…Lastly, but importantly, our paper contributes to the empirical studies on financial fragmentation of euro area money markets during the European sovereign debt crisis (see seminal contributions by Manna 2011, de Andoain et al 2014, Vari 2014, Abbassi et al 2015, Mayordomo et al 2015. Studies on EU financial market disintegration predominantly disentangle the measurement, the determinants, and the impact of macro policy-driven interventions on fragmentation.…”

Section: Related Literaturementioning

confidence: 86%

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Bank–Sovereign Ties Against Interbank Market Integration: The Case of the Italian Segment

Saroyan

Popoyan

2017

SSRN Journal

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Section: Related Literaturementioning

confidence: 68%

Section: Related Literaturementioning

confidence: 86%

Bank–Sovereign Ties Against Interbank Market Integration: The Case of the Italian Segment

Saroyan

Popoyan

2017

SSRN Journal

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“…First, it will seek to fulfil its demand on the interbank market in order to repay the central bank for the advances accommodated (

I B^{D}

), Equations ()–(). The two segments of the interbank market can be considered as complementary, hence bank j can borrow at the same time both overnight and term, as also specified by Abbassi et al (2014). To capture this, the amount demanded overnight is expressed as a fraction

θ

of total quantity (

I B_{italicon}^{D}

), and the term demand is residually defined (

I B_{italicterm}^{D}

).…”

Section: The Modelmentioning

confidence: 99%

Interbank market and funding liquidity risk in a stock‐flow consistent model

Reale

2022

Metroeconomica

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The present stock‐flow consistent model aims at capturing the second causal link of endogenous monetary theory, from deposits to reserves, by including intrasectoral flows within the banking sector and debt maturity structure decisions. For this purpose, banks can choose the demanded duration of interbank loans, either overnight or term, according to a measure for maturity mismatch which captures funding liquidity risk. The simulations show that: (i) a well‐functioning term interbank market is needed when banks face exogenous shocks; and (ii) banks’ funding structure may act as an endogenous source of credit market pressures.

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“…After the global crisis, UK and euro area banks reduced their leverage to meet the new Basel III standards. Afterward, the increased concerns regarding the creditworthiness of European banks that experienced difficulties in the 2010 sovereign debt crisis catalysed these banks to reduce their international operations, especially in emerging markets (Cull and Martínez-Pería, 2013;BIS, 2018), and to contract both domestic and interbank lending (see, Becker and Ivashina, 2018;Acharya et al, 2018;Abbassi et al, 2020;Bottero et al, 2020).…”

Section: The Internationalization Of Domestic Banksmentioning

confidence: 99%

The internationalization of domestic banks and the credit channel of monetary policy

Morales¹,

Osório²,

Lemus³

et al. 2021

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How does the expansion of domestic banks in international markets affect the bank lending channel of monetary policy? Using bank-firm loan-level data, we find that loan growth and loan rates from international banks respond less to monetary policy changes than domestic banks and that internationalization partially mitigates the risk-taking channel of monetary policy. Banks with a large international presence tend to tolerate more their credit risk exposition relative to domestic banks. Moreover, international banks tend to rely more on foreign funding when policy rates change, allowing them to insulate better the monetary policy changes from their credit supply than domestic banks. This result is consistent with the predictions of the internal capital markets hypothesis. We also show that macroprudential FX regulation reduces banks with high FX exposition access to foreign funding, ultimately contributing to monetary policy transmission. Overall, our results suggest that the internationalization of banks lowers the potency of the bank lending channel. Furthermore, it diminishes the risk-taking channel of monetary policy within the limit established by macroprudential FX regulations.

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Cross-Border Liquidity, Relationships and Monetary Policy: Evidence from the Euro Area Interbank Crisis

Cited by 10 publications

References 0 publications

Bank–Sovereign Ties Against Interbank Market Integration: The Case of the Italian Segment

Bank–Sovereign Ties Against Interbank Market Integration: The Case of the Italian Segment

Interbank market and funding liquidity risk in a stock‐flow consistent model

The internationalization of domestic banks and the credit channel of monetary policy

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