Bundesbank paper explores interbank market functionality during crisis
Banks’ fundamental weaknesses were key factor behind problems, researchers say
The interbank market can distinguish whether banks are fundamentally sound during times of general market distress, a discussion paper published recently by the Bundesbank argues.
In Fundamentals matter: idiosyncratic shocks and interbank relations, Peter Bednarek, Valeriya Dinger and Natalja von Westernhagen investigate the interbank market distress of 2007–8.
Using data drawn from the Bundesbank's credit register data, they analyse 1.9 million interbank relationships between 3,500 German banks
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