and deposit data (5) are chosen from the annual reports of 16 major UK-owned banks which release consolidated balance sheets.
The second type of report discloses each outstanding interbank loan
separately, reports the lender, borrower, and pending amount.
* The TED spread: Basically, the TED spread is the difference between the interest rate on an unsecured interbank loan
(1-month KIBOR in this case) and interest rate on a secured loan (1-month PKRV in this case).6 Generally, the international trends suggest that money market includes loans with maturities up to one year.
Finally, we discuss in the conclusion the possibility that, beyond fed funds, the algorithm output captures more general overnight interbank loans
. Although we provide some evidence to support this hypothesis, we ultimately conclude that the algorithm cannot systematically recognize that a given pair of payments corresponds to an overnight interbank loan
between two specific banks.
The researchers used three independent channels of systemic risk - the interbank loan
market, the sovereign credit risk market and the asset-backed loan market - to test which banks were resilient and to track how shocks spread between domestic and international banks.
According to data compiled by the newspaper, used as the source for the article, the big four UK banks cut interbank loan
volumes by more than 24% to 10.5 billion pounds ($16.6 billion) in the three months to end-September, as Europe's debt crisis worsened.
The initial interbank loan
market will be a daily market for overnight and 30-day loans.
For similar reasons, stress tests reduce the costs and increase the effectiveness of government programs that guarantee interbank loans
. To illustrate, we note that interbank loan
guarantees are very expensive because they transfer credit risk from the banking system to the government.
''A mechanism that supports such interbank loan
transactions would better do the trick,'' he said.
Examples of other types of loans which were excluded by Monetary Board from the computation of the SBL are: (a) loans covered by legally effective credit risk transfer arrangements; (b) certain interbank loan
transactions; (c) short-term exposures of banks to settlement banks; and (d) loans covered by guarantees of international/regional institutions/multilateral financial institutions.