Olivier De Jonghe, Hans Dewachter, Klaas Mulier, Steven Ongena, Glenn Schepens, 06 March 2020

Banks in Belgium made strategic lending decisions after the freeze of the interbank funding market in September 2008. This column uses bank-firm combinations to show that banks reallocated credit to sectors where they can more easily extract rents or in which they have an information advantage, or to low-risk firms.

Silvia Gabrieli, Claire Labonne, 02 November 2018

By affecting the funding capacity of banks, interbank market fragmentation can hinder the smooth transmission of monetary policy and thus impair the provision of credit to the real economy. This column examines the fragmentation of the euro area interbank market in 2011-15, and finds that the size and quality of banks’ exposures to peripheral countries impaired banks’ access to, and increased the price paid for, interbank funding. This important channel of fragmentation risk was stopped by the ECB’s announcement of possible Outright Monetary Transactions in secondary government bonds markets.

Events

CEPR Policy Research