• Media type: E-Article
  • Title: Deposit competition, interbank market, and bank profit
  • Contributor: Jiang, Bo [Author]; Tzavellas, Hector [Author]; Yang, Xiaoying [Author]
  • Published: Basel: MDPI, 2022
  • Language: English
  • DOI: https://doi.org/10.3390/jrfm15050194
  • ISSN: 1911-8074
  • Keywords: BLP ; interbank market ; deposit competition ; Bank Profitability ; structural estimation
  • Origination:
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  • Description: In this paper, we study how the interbank market could impact deposit competition and bank profits. We first document two stylized facts: the net interbank funding ratio is negatively correlated with net interest margin (NIM), as well as with the cost-to-income ratio (CIR). To rationalize these two facts, we embed the interbank market into a BLP model framework. The model is calibrated using Chinese listed banks' data. A counterfactual experiment reveals that shutting down the interbank market will lead to a decline in NIM and bank profits. Our results indicate that the interbank market can facilitate specialization and reduce the intensity of deposit competition.
  • Access State: Open Access
  • Rights information: Attribution (CC BY) Attribution (CC BY)