Does Interbank Borrowing Reduce Bank Risk?

Dinger, Valeriya; von Hagen, Jürgen

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Does Interbank Borrowing Reduce Bank Risk?

CEPR Discussion Paper No. DP6635

27 Pages Posted: 5 Jun 2008

See all articles by Valeriya Dinger

Jürgen von Hagen

University of Bonn - Institute of Economic Policy; Centre for Economic Policy Research (CEPR)

Date Written: January 2008

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.

Keywords: Bank risk, interbank market, market discipline, transition countries

JEL Classification: E53, G21

Suggested Citation: Suggested Citation

Dinger, Valeriya and von Hagen, Jürgen, Does Interbank Borrowing Reduce Bank Risk? (January 2008). CEPR Discussion Paper No. DP6635, Available at SSRN: https://ssrn.com/abstract=1140564