We thank an anonymous referee, Adam Ashcraft, Hendrik Hakenes, Iftekhar Hasan, Deborah Lucas, Erik Theissen, and participants at XII Tor Vergata Conference on Money and Banking (2003), the Far Eastern Meeting of the Econometric Society (2004), and the Verein für Socialpolitik Tagung (2004) for valuable comments on earlier drafts.
Does Interbank Borrowing Reduce Bank Risk?
Article first published online: 25 MAR 2009
© 2009 The Ohio State University
Journal of Money, Credit and Banking
Volume 41, Issue 2-3, pages 491–506, March-April 2009
How to Cite
DINGER, V. and VON HAGEN, J. (2009), Does Interbank Borrowing Reduce Bank Risk?. Journal of Money, Credit and Banking, 41: 491–506. doi: 10.1111/j.1538-4616.2009.00217.x
- Issue published online: 25 MAR 2009
- Article first published online: 25 MAR 2009
- Received August 15, 2005; and accepted in revised form November 21, 2007.
- interbank market;
- bank risk;
- market discipline;
- transition countries
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 that 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.