DP6635 Does Interbank Borrowing Reduce Bank Risk?

Author(s): Valeriya Dinger, Jürgen von Hagen
Publication Date: January 2008
Keyword(s): bank risk, interbank market, market discipline, transition countries
JEL(s): E53, G21
Programme Areas: International Macroeconomics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=6635

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.