Identification of Interbank Loans and Interest Rates from Interbank Payments - A Reliability Assessment

23 Pages Posted: 15 Feb 2019

Date Written: June 29, 2018

Abstract

We investigate the reliability of the 'Furfine filter' often used to identify interbank loans and interest rates from interbank payments settled at central banks. To this end, we have been granted access to records of all unsecured overnight interbank loans during a month from the banks that participated in Norges Bank's real-time gross settlement system. The filter applied was able to identify each of these loans and correctly derive the associated interest rates. The filter's reliability is also supported by additional evidence based on the Norwegian Overnight Weighted Average (NOWA) interest rates beyond the survey month. Sensitivity analyses suggest the share of false or overlooked loans may remain small if the filter design largely incorporates interbank market conventions regarding loan size requests and interests rate quotes.

Keywords: overnight interbank market, furfine-algorithm, rtgs

JEL Classification: C63, G21, E43, E58

Suggested Citation

Akram, Qaisar Farooq and Fevolden, Mats and Smith, Lyndsie, Identification of Interbank Loans and Interest Rates from Interbank Payments - A Reliability Assessment (June 29, 2018). Norges Bank Working Paper 8/2018; ISBN 978-82-8379-050-4. Available at SSRN: https://ssrn.com/abstract=3334894 or http://dx.doi.org/10.2139/ssrn.3334894

Qaisar Farooq Akram (Contact Author)

Norges Bank ( email )

Bankplassen 2
P.O. Box 1179
Oslo, N-0107
Norway

Mats Fevolden

Norges Bank ( email )

P.O. Box 1179
Oslo, N-0107
Norway

Lyndsie Smith

Norges Bank ( email )

P.O. Box 1179
Oslo, N-0107
Norway

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