Discussion Paper Details

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Title: Does Interbank Borrowing Reduce Bank Risk?

Author(s): Valeriya Dinger and Jürgen von Hagen

Publication Date: January 2008

Keyword(s): bank risk, interbank market, market discipline and transition countries

Programme Area(s): International Macroeconomics

Abstract: 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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Bibliographic Reference

Dinger, V and von Hagen, J. 2008. 'Does Interbank Borrowing Reduce Bank Risk?'. London, Centre for Economic Policy Research.