2013 Fiscal Year Final Research Report

An empirical analysis of the interbank market during Japan's banking crisis

Research Project

Project/Area Number	24730284
Research Category	Grant-in-Aid for Young Scientists (B)
Allocation Type	Multi-year Fund
Research Field	Public finance/Monetary economics
Research Institution	Osaka University of Economics
Principal Investigator	AKIYOSHI FUMIO 大阪経済大学, 経済学部, 准教授 (30454490)
Project Period (FY)	2012-04-01 – 2014-03-31
Keywords	金融危機 / インターバンク市場
Research Abstract	Interbank markets play a key role in enhancing the efficiency of financial system. They contribute in the efficient allocation of liquidity among banks. They also facilitate imposition of discipline on bank management, because banks are sufficiently informed to monitor their peers effectively. We examine the interbank market in Japan during the 1997-98 banking crisis. There was a change in the relationship between borrower risk and the borrowing terms. We find almost no relationships between borrower risk and borrowing terms in the pre-crisis period. In contrast, we find that riskier banks borrowed less from the interbank market during the crisis period. These results suggest that interbank lenders could discriminate between high- and low-risk borrowers even during the crisis. Thus, the crisis did not seriously harm the function of the interbank market.

(1 results)