Identifying relationship lending in the interbank market: A network approach

2017/08/31 by Teruyoshi Kobayashi, Taro Takaguchi · 26 citations
Business, Management and Accounting · Economics, Econometrics and Finance · #Actuarial science #Banking stability, regulation, efficiency #Business #Digital Platforms and Economics #Econometrics #Economics #Finance #Financial distress #Financial system #General partnership #Interbank lending market #Interest rate #Italy: Economic History and Contemporary Issues #Monetary economics #q-fin.GN #q-fin.TR

paper · pdf · doi:10.1016/j.jbankfin.2018.09.018

published in Journal of Banking & Finance 97, 20-36 (Elsevier BV) · Main text: 39 pages, 15 figures. SI: 4 pages, 3 figures

arxiv created 2018/04/27 · openalex publication_date 2018/10/01 · arxiv updated 2018/10/11 · openalex created_date 2025/10/10 · openalex updated_date 2026/08/05

Abstract

Relationship lending is broadly interpreted as a strong partnership between a lender and a borrower. Nevertheless, we still lack consensus regarding how to quantify the strength of a lending relationship, while simple statistics such as the frequency and volume of loans have been used as proxies in previous studies. Here, we propose statistical tests to identify relationship lending as a significant tie between banks. Application of the proposed method to the Italian interbank networks reveals that the fraction of relationship lending among all bilateral trades has been quite stable and that the relationship lenders tend to impose high interest rates at the time of financial distress.

Citations

• Dynamics of Person-to-Person Interactions from Distributed RFID Sensor Networks
• Power-Law Distributions in Empirical Data
• Fitness model for the Italian interbank money market
• The Effect of Credit Market Competition on Lending Relationships
• Precautionary Reserves and the Interbank Market
• The Strength of Weak Ties
• Network Structure and Systemic Risk in Banking Systems