Unsecured and Secured Funding

19 Pages Posted: 14 Aug 2016 Last revised: 4 Mar 2021

See all articles by Mario di Filippo

Mario di Filippo

World Bank Group; World Bank Group

Angelo Ranaldo

University of St. Gallen; University of St. Gallen - School of Finance

Jan Wrampelmeyer

Vrije Universiteit Amsterdam, School of Business and Economics; Tinbergen Institute

Date Written: December 10, 2020

Abstract

The appendices for this paper may be found here: https://ssrn.com/abstract=3746406.

We study how individual banks borrow and lend in the euro unsecured and secured interbank market. We find that banks with lower credit worthiness replace unsecured with secured borrowing, which is consistent with a reduction in the supply of unsecured loans rather than a lower demand for funding. Riskier lenders replace unsecured with secured lending, suggesting that banks take precautionary measures and prefer to lend against safe collateral. Our results highlight the importance of a joint analysis of unsecured and secured funding. Separate analyses only give a partial view and might yield misleading conclusions when banks access both funding sources.

Keywords: Interbank market, funding risk, unsecured funding, repurchase agreements, counterparty credit risk

JEL Classification: E42, E43, E58, G01, G21, G28

Suggested Citation

di Filippo, Mario and Ranaldo, Angelo and Wrampelmeyer, Jan, Unsecured and Secured Funding (December 10, 2020). Available at SSRN: https://ssrn.com/abstract=2822345 or http://dx.doi.org/10.2139/ssrn.2822345

Mario Di Filippo

World Bank Group ( email )

1818 H st NW
Washington, DC 20122
United States

World Bank Group ( email )

1818 H st NW
Washington, DC 20122
United States

Angelo Ranaldo

University of St. Gallen ( email )

Swiss Institute of Banking and Finance s/bf-HSG
Unterer Graben 21
St. Gallen, 9000
Switzerland
+41712247010 (Phone)

HOME PAGE: http://www.sbf.unisg.ch/Lehrstuehle/Lehrstuhl_Ranaldo/Homepage_Ranaldo.aspx

University of St. Gallen - School of Finance ( email )

Unterer Graben 21
St.Gallen, CH-9000
Switzerland

Jan Wrampelmeyer (Contact Author)

Vrije Universiteit Amsterdam, School of Business and Economics ( email )

De Boelelaan 1105
Amsterdam, 1081HV
Netherlands

Tinbergen Institute ( email )

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

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