The Topology of the Interbank Market: Developments in Italy Since 1990

Iazzetta, Carmela; Manna, Michele

doi:10.2139/ssrn.1478472

Cited by 50 publications

(24 citation statements)

References 119 publications

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“…This trend has increased the value of intraday liquidity. As shown by Iazzetta and Manna (2009), interbank deposits as a percentage of total assets of the banking system doubled from 8% in 1993 to approximately 16% in 2007. According to the European Central Bank (2011a), the e-MID accounted, before the crisis, for 17% of the total turnover in the unsecured money market in the Euro area.…”

Section: Market Mechanismmentioning

confidence: 99%

Market Microstructure, Banks' Behaviour, and Interbank Spreads

et al. 2013

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We present an empirical analysis of the European electronic interbank market of overnight lending (e-MID) during the years 1999-2009. The main goal of the paper is to explain the observed changes of the cross-sectional dispersion of lending/borrowing conditions before, during and after the 2007-2008 subprime crisis. Unlike previous contributions, that focused on banks' dependent and macro information as explanatory variables, we address the role of banks' behaviour and market microstructure as determinants of the credit spreads.

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Section: Market Mechanismmentioning

confidence: 99%

Market Microstructure, Banks' Behaviour, and Interbank Spreads

et al. 2013

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“…Ref (23) analyses the microstructure of the e-Mid market over the period 1999-2002 and observe a fairly random distribution of links without preferential lending or intermediaries. Ref (24) performs an empirical analysis of the e-Mid market between 1990 and 2008 and report an increasing high degree of banks concentration with fewer banks acting as global hubs for the whole network. Ref (25) shows that the network resulting from Fedfunds exchanges is sparse, exhibits small world phenomena and is disassortative.…”

Section: Introductionmentioning

confidence: 99%

Quantifying Preferential Trading in the e-MID Interbank Market

Hatzopoulos

Iori

Mantegna³

et al. 2013

SSRN Journal

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This is the accepted version of the paper.This version of the publication may differ from the final published version. Interbank markets allow credit institutions to exchange capital for purposes of liquidity management. These markets are among the most liquid markets in the financial system. However, liquidity of interbank markets dropped during the 2007-2008 financial crisis, and such a lack of liquidity influenced the entire economic system. In this paper, we analyze transaction data from the e-MID market which is the only electronic interbank market in the Euro Area and US, over a period of eleven years (1999)(2000)(2001)(2002)(2003)(2004)(2005)(2006)(2007)(2008)(2009)). We adapt a method developed to detect statistically validated links in a network, in order to reveal preferential trading in a directed network. Preferential trading between banks is detected by comparing empirically observed trading relationships with a null hypothesis that assumes random trading among banks doing a heterogeneous number of transactions. Preferential trading patterns are revealed at time windows of 3-maintenance periods. We show that preferential trading is observed throughout the whole period of analysis and that the number of preferential trading links does not show any significant trend in time, in spite of a decreasing trend in the number of pairs of banks making transactions. We observe that preferential trading connections typically involve large trading volumes. During the crisis, we also observe that transactions occurring between banks with a preferential connection occur at larger interest rates than the complement set -an effect that is not observed before the crisis. Permanent repository link

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“…If we are to compare the study of the Italian network in [LM09] to this more recent one of Cont and Santos [CS09] considering the Brazilian case, we find that while the former shed more light on the historical trends and development of the network, the Cont and Santos study is directed more toward a quantitative detailed description of the network with a heavy employment of statistical significance analysis to their findings. As such we take the Cont and Santos study as our starting point for examining the contagion risk on a simulated network of the interbank market.…”

Section: Distribution Of Residualsmentioning

confidence: 94%

An Agent-Based Computational Model for Bank Formation and Interbank Networks

Ismail¹

2013

Handbook on Systemic Risk

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The aim of this thesis is to study the role of banking in society and the effect of the interbank market on the performance of the banking system. It starts by reviewing several studies conducted on empirical banking networks and highlighting their salient features in the context of modern network theory. A simulated network resembling the characteristics documented in the empirical studies is then built and its resilience is analyzed with a particular emphasis in documenting the crucial role played by highly interconnected banks.It is our belief that the study of systemic risk and contagion in a banking system is an integral part to the study of the economic role of banks themselves. Thus the current work focuses on the fundamentals of banking and aims at identifying the necessary drivers for a dynamical setup of the interbank market.Through an agent-based model, we address the issues of bank formation, bank runs and the emergence of an interbank market. Starting with heterogeneous individuals, bank formation is viewed as an emergent phenomenon arising to meet the needs for investment opportunities in face of uncertain liquidity preferences. When banks work in isolation (no interbank market), in the long run and through a long experience with bank failures, banking turns into a monopoly or a market with few players.By equipping banks with their own learning tools and allowing an interbank market to develop, fewer bank failures and a less concentrated banking system are witnessed.In addition, through a scenario analysis, it is demonstrated that allowing banks to interact does not weaken the banking system in almost all the cases, and improves the performance on multiple occasions.The work is concluded by studying the effects of a banking system on individuals and the economy in what is called social measures. We establish that the effects of banking on social measures such as consumption level, consumption inequality between individuals, long term investment and economic waste, varies significantly based on the structure of the society.iii

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The Topology of the Interbank Market: Developments in Italy Since 1990

Cited by 50 publications

References 119 publications

Market Microstructure, Banks' Behaviour, and Interbank Spreads

Market Microstructure, Banks' Behaviour, and Interbank Spreads

Quantifying Preferential Trading in the e-MID Interbank Market

An Agent-Based Computational Model for Bank Formation and Interbank Networks

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