Zur Vertrauensökonomik: Der Interbankenmarkt in der Krise von 2007-2009[Economics of trust: The interbank market during the crisis 2007-2009]

“Vertrauen ist der Anfang von allem” (“trust is the beginning of everything”)- A large bank seemed to be aware of the importance of trust within financial markets when it started the marketing campaign in 1995. Almost fifteen years later banks all over the world trust nearly nobody and were not trusted by anybody. In this paper the origins, functions and aftermath of trust/distrust in financial economics are investigated by firstly analyzing trust in economic relationships in a general theoretical matter. Secondly, we provide some indicators for measuring institutional and interbank specific trust. Thirdly, we evaluate policy measures conducted by central banks due to recover the trust relationships at European interbank market. The paper is separated into two parts and seven chapters including introduction and conclusion. The first part explains a more generic approach to introduce trust and distrust into economic decisions. Thus, chapter 2 begins with some definitions about trust and an explanation about its relevance and functions in contract theory. Chapter 3 analyzes the formation of trust and distrust in the microeconomic environment based upon principal-agent theory. While trust and distrust vary in the date of origin they are both rational decision based and thus influenced by expectations, information and experience. Furthermore, the concept of social capital is introduced as a theory to explain trust and distrust in a macroeconomic framework which is more relevant to explain trust crises. The theoretical aspects are empirically applied by analyzing the net trust in macroeconomic institutions as government, central bank and money. A trust crisis - defined as sudden shift from positive to negative net trust - between EU citizen and national/transnational institutions in 2008/2009 can only be verified in case of the European Central Bank. But in contrast to theoretical requirements the net distrust occurs only for a short period. The next chapter (4) applies the economic theory of trust to the specific situation on interbank market transactions. Therefore, it investigates the role of trust in interbank relationships and the problem that occurs if this relationship is damaged. Finally, four indicators were derived to identify the want on confidence in bank-to-bank transactions: (a) the difference between EURIBOR and EUREPO rates (b) the credit volume of unsecured liabilities (c) the level of capacity for permanent facilities (d) vertical equalization of liquidity between central and commercial banks. The results of chapters 2-4 provide the theoretical framework for analyzing the specific situation at the European interbank market crisis in the second part of the paper. Chapter 5 starts with a general survey about the chronology and causes of the financial crises 2007-2009. The next chapter (6) reappraises the previously derived indicators of interbank confidence in pre-, within-, and after-crisis periods. It can be shown that the distrust situation between banks slew down since 2009, similarly to the results of institutional trust for the whole economy. The chapter closes with an interpretation of the results and some theoretical explanations. Within the last chapter (7) the reaction (interest rate reduction, restructuring of the tender system) of monetary authority to the financial distress is explained and evaluated in terms of restoring the interbank market.