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Interbank relationship lending revisited: Are the funds available at a similar price?

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  • Carlos León
  • Javier Miguélez

Abstract

Under the market discipline hypothesis, monitoring by interbank lenders may induce changes in either the price or availability of new interbank funds to borrower banks. However, the presence of interbank relationship lending has been evaluated based on the availability of funds only—disregarding their price. We revisit relationship lending in unsecured interbank lending markets by simultaneously evaluating the availability and price of funds. We calculate the survival ratio of networks containing the price of daily interbank lending in Colombia from 2014 to 2020. Under this framework, an interbank relation survives from one day to the next if the funds are available at a price that does not increase too much; that is, either a halt in interbank funding or a sizeable increase in the price of interbank funding mark a break in the relation between two banks. We find that about 38 percent of relations in the Colombian unsecured interbank lending market survive from one day to the next. Therefore, from a comprehensive market discipline perspective, we find evidence of interbank relationship lending in Colombia. **** RESUMEN: Según la hipótesis de disciplina de mercado, el monitoreo que realizan los bancos que otorgan créditos en el mercado interbancario puede inducir cambios en el precio o disponibilidad de nuevos fondos para los bancos que buscan liquidez. No obstante, la presencia de relaciones de préstamo interbancario se ha evaluado con base en la disponibilidad de fondos únicamente dejando de lado su precio. En este documento reexaminamos la presencia de relaciones de préstamo interbancario evaluando simultáneamente la disponibilidad y precio de fondos interbancarios. Calculamos el coeficiente de sobrevivencia de las redes diarias que contienen el precio de los préstamos interbancarios en Colombia desde 2014 hasta 2020. Bajo esta aproximación, una relación interbancaria sobrevive de un día al siguiente si los fondos están disponibles a un precio que no se incrementa demasiado; en este sentido, la no disponibilidad de fondos o un aumento considerable en el precio de los fondos marca una discontinuidad en la relación entre dos bancos. Encontramos que cerca del 38 porciento de las relaciones en el mercado interbancario no colateralizado sobrevive de un día al siguiente. En consecuencia, desde una perspectiva amplia de disciplina de mercado, encontramos evidencia de la existencia de relaciones de préstamo interbancario en Colombia.

Suggested Citation

  • Carlos León & Javier Miguélez, 2021. "Interbank relationship lending revisited: Are the funds available at a similar price?," Borradores de Economia 1151, Banco de la Republica de Colombia.
    • Handle: RePEc:bdr:borrec:1151
    DOI: https://doi.org/10.32468/be.1151
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    More about this item

    Keywords

    Market discipline; interbank; lending; network; disciplina de mercado; interbancario; préstamo; redes.;
    All these keywords.

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

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