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Interbank relationship lending: A network perspective

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  • León, Carlos
  • Miguélez, Javier

Abstract

Stable and strong unsecured lending relations among financial institutions have been credited as the mainstay of interbank markets and financial stability. We measure how stable interbank relations are in Colombia by calculating interbank networks’ survival ratio, i.e. the fraction of linkages found in consecutive networks. On average, about 57 percent of linkages survive from one day to the next. About 36, 28, and 22 percent of linkages survive a 5-, 10-, and 20-day period, respectively. Results are robust to the exclusion of low-value linkages, intraday lending, and non-banking institutions. A non-parametric test discards randomness as a plausible source of observed survival ratios. Preliminary examination of survival ratios during the first weeks of the financial turmoil caused by the Covid-19 pandemic and falling oil price suggests that trust in the interbank market was not seriously affected. Consequently, we conclude that stable and strong interbank lending relations exist in the Colombian market.

Suggested Citation

  • León, Carlos & Miguélez, Javier, 2021. "Interbank relationship lending: A network perspective," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 573(C).
    • Handle: RePEc:eee:phsmap:v:573:y:2021:i:c:s0378437121001941
    DOI: 10.1016/j.physa.2021.125922
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    References listed on IDEAS

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    Cited by:

    1. Yan, Chun & Ding, Yi & Liu, Wei & Liu, Xinhong & Liu, Jiahui, 2023. "Multilayer interbank networks and systemic risk propagation: Evidence from China," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 628(C).

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    More about this item

    Keywords

    Interbank; Lending; Survival; Linkage; Network;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

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