Journal of Banking & Finance Vol. 106 2019
What drives interbank loans? Evidence from Canada
Abstract
We find that collateral reallocation costs are a significant driver of the dynamics of overnight interbank loans. The cost of negotiating and settling collateralized over-the-counter trades incentivizes the temporary use of unsecured loans to meet changes in short-term liquidity needs, as well as greater uptake of central bank overnight lending facilities. This friction also leads to repos adjusting gradually in response to persistent changes in liquidity demand.
- DOI
- 10.1016/j.jbankfin.2019.07.016
- Volume
- 106
- Pages
- 427-444
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref