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Identifying Term Interbank Loans from Fedwire Payments Data


Dennis Kuo


University of California, Los Angeles (UCLA)

David R. Skeie


Federal Reserve Bank of New York

James I. Vickery


Federal Reserve Bank of New York

Thomas Youle


University of Minnesota - Twin Cities - Department of Economics

August 2014

FRB of New York Staff Report No. 603

Abstract:     
Interbank markets for term maturities experienced great stress during the 2007-09 financial crisis, as illustrated by the behavior of one- and three-month Libor. Despite widespread interest in these markets, little data are available on dollar interbank lending for maturities beyond overnight. We develop a methodology to infer individual term dollar interbank loans (for maturities between two days and one year) by applying a set of filters to payments settled on the Fedwire Funds Service, the large-value bank payment system operated by the Federal Reserve Banks. Our approach introduces several innovations and refinements relative to previous research by Furfine (1999) and others that measures overnight interbank lending. Diagnostic tests to date suggest our approach provides a novel and useful source of information about the term interbank market, allowing for a number of research applications. Limitations of the algorithm and caveats on its use are discussed in detail. We also present stylized facts based on the algorithm's results, focusing on the 2007-09 period. At the crisis peak following the failure of Lehman Brothers in September 2008, we observe a sharp increase in the dispersion of inferred term interbank interest rates, a shortening of loan maturities, and a decline in term lending volume.

Number of Pages in PDF File: 49

Keywords: interbank market, loan, Fedwire, algorithm

JEL Classification: G01, G10, G21

working papers series


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Date posted: March 12, 2013 ; Last revised: August 20, 2014

Suggested Citation

Kuo, Dennis and Skeie, David R. and Vickery, James I. and Youle, Thomas, Identifying Term Interbank Loans from Fedwire Payments Data (August 2014). FRB of New York Staff Report No. 603. Available at SSRN: http://ssrn.com/abstract=2232111 or http://dx.doi.org/10.2139/ssrn.2232111

Contact Information

Dennis Kuo
University of California, Los Angeles (UCLA) ( email )
405 Hilgard Avenue
Box 951361
Los Angeles, CA 90095
United States
David R. Skeie
Federal Reserve Bank of New York ( email )
33 Liberty Street
New York, NY 10045
United States
James Ian Vickery (Contact Author)
Federal Reserve Bank of New York ( email )
33 Liberty Street
New York, NY 10045
United States
Thomas Youle
University of Minnesota - Twin Cities - Department of Economics ( email )
271 19th Avenue South
Minneapolis, MN 55455
United States
612-625-7837 (Phone)
HOME PAGE: http://www.econ.umn.edu/~youle001/
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