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April 30, 2026
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Relationship lending during a trust crisis on the interbank market: A friend in need is a friend indeed

Economics Letters. 2019. Vol. 182. P. 1–4.
Schoors K., Karas A., Degryse H.

We exploit uncertainty regarding banks’ involvement in money laundering activities as a natural experiment to study the functioning of the interbank market in uncertain times. We show that bank couples with a stronger relationship (i.e., more frequent and reciprocal interactions before the event) are more likely to continue lending to one another, and at lower interest rates. This is in line with a “helping hand” or “flight to friends” hypothesis during crisis.

Priority areas: economics
Language: English
DOI
Text on another site
Keywords: interbank marketBanksHelping-hand hypothesisTrust crisisRelationship banking
Publication based on the results of:
Institutions, laws and informal practices: analysis of the behavior of economic agents (2019)
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