Interbank Contagion in the Dutch Banking Sector: A Sensitivity Analysis
by Iman van Lelyvelda,b and Franka Liedorpb
We investigate interlinkages and contagion risks in the Dutch interbank market.
Based on several data sources, including survey data, we estimate the exposures
in the interbank market at bank level. Next, we perform a scenario analysis to
measure contagion risks. We find that the bankruptcy of one of the large banks
will put a considerable burden on the other banks but will not lead to a
complete collapse of the interbank market. The exposures to foreign
counterparties are large and warrant further research. An important
contribution of this paper is that we show, using survey data, that the entropy
estimation using large exposures data as applied in many previous papers gives
an adequate approximation of the actual linkages between banks. Hence, this
methodology does not seem to introduce a bias.
JEL Codes: G15, G20.
(PDF, 35 pages 423 kb)
a Nijmegen School of Management, Radboud University
Supervisory Policy Division, De Nederlandsche Bank