Identifying Term Interbank Loans from Fedwire Payments Data - Federal Reserve Bank of New York

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Identifying Term Interbank Loans from Fedwire Payments Data

March 2013 Number 603
Revised August 2014

JEL classification: G01, G10, G21

Authors: Dennis Kuo, David Skeie, James Vickery, and Thomas Youle

Interbank markets for term maturities experienced great stress during the 2007-09 financial crisis, as illustrated by the behavior of the one- and three-month Libor. Despite widespread interest in these markets, little data is available on dollar interbank lending for maturities beyond overnight. We develop a methodology to infer information about individual term dollar interbank loans settled through the Fedwire® Funds Service, the large-value bank payment system operated by the Federal Reserve Banks. We find a sharp increase in the dispersion of inferred term interbank interest rates, a shortening of loan maturities, and a decline in term lending volume following the failure of Lehman Brothers in September 2008. Several diagnostic tests suggest that our approach provides a useful source of information about the term interbank market, allowing for a number of research applications.

Available only in PDF pdf

49 pages / 610 kb

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