Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/175713 
Year of Publication: 
2017
Series/Report no.: 
ECB Working Paper No. 2089
Publisher: 
European Central Bank (ECB), Frankfurt a. M.
Abstract: 
Multiple lending has been widely investigated from both an empirical and a theoretical perspective. Nevertheless, the implications of multiple lending for the stability of the banking system still need to be understood. By lending to a common set of borrowers, banks are interconnected and then exposed to financial contagion phenomena, even if not directly. In this paper, we investigate a specific type of externality that originates from those borrowers that obtain liquidity from more than one bank. In this case, contagion may occur if a bank hit by a liquidity shock calls in some loans and borrowers then pay them back by drawing money from other banks. We show that, under certain circumstances that make other sources of liquidity unavailable or too costly, multiple lending might be responsible for a large liquidity shortage.
Subjects: 
interbank market
financial contagion
systemic risk
multiple lending
credit lines
JEL: 
G21
G28
Persistent Identifier of the first edition: 
ISBN: 
978-92-899-2811-3
Document Type: 
Working Paper

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