DP6635 | Does Interbank Borrowing Reduce Bank Risk?

Publication Date

11/01/2008

JEL Code(s)

Keyword(s)

Programme Area(s)

Abstract

In this paper we investigate whether banks that borrow from other banks have lower risk levels. We concentrate on a large sample of Central and Eastern European banks which allows us to explore the impact of interbank lending when exposures are long-term and interbank borrowers are small banks. The results of the empirical analysis generally confirm the hypothesis that long-term interbank exposures result in lower risk of the borrowing banks.