Banks of a Feather: The Informational Advantage of Being Alike

67 Pages Posted: 11 Aug 2023

See all articles by Peter Bednarek

Peter Bednarek

Deutsche Bundesbank

Valeriya Dinger

University of Osnabrück

Alison Schultz

University of Mannheim; Tax Justice Network

Natalja von Westernhagen

Deutsche Bundesbank

Date Written: 2023

Abstract

Banks lend more to banks that are similar to them. Using data from the German credit register and proprietary supervisory data on the quality of banks' loan portfolio, we show that a similar portfolio of the lending and borrowing bank helps to overcome information asymmetries in interbank markets. While interbank lenders generally do not adjust their lending to information on the counterparty's portfolio quality, banks with an exposure to similar industries and regions strongly react to this private information. Lending between similar banks is particularly important for borrowers with an opaque loan portfolio, which do not obtain credit from dissimilar peers.

Keywords: Peer monitoring, interbank markets, asymmetric information, portfolio quality, portfolio similarity, systemic risk and contagion

JEL Classification: E50, G11, G20, G21

Suggested Citation

Bednarek, Peter and Dinger, Valeriya and Schultz, Alison and von Westernhagen, Natalja, Banks of a Feather: The Informational Advantage of Being Alike (2023). Deutsche Bundesbank Discussion Paper No. 09/2023, Available at SSRN: https://ssrn.com/abstract=4536999 or http://dx.doi.org/10.2139/ssrn.4536999

Peter Bednarek (Contact Author)

Deutsche Bundesbank ( email )

Wilhelm-Epstein-Str. 14
Frankfurt/Main, 60431
Germany
004969 9566-8972 (Phone)

HOME PAGE: http://www.bundesbank.de

Valeriya Dinger

University of Osnabrück ( email )

Germany

Alison Schultz

University of Mannheim ( email )

Mannheim, 68131
Germany

HOME PAGE: http://https://sites.google.com/view/alisonschultz

Tax Justice Network ( email )

United Kingdom

HOME PAGE: http://https://taxjustice.net/

Natalja Von Westernhagen

Deutsche Bundesbank ( email )

Wilhelm-Epstein-Str. 14
Frankfurt/Main, 60431
Germany

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